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Visitacion, filed with a case for damages before the The accused public officials were devoid of any power
RTC. Spouses Bombasi, thereafter, filed a criminal to demolish the store. A closer look at the contested
complaint21 against Mayor Comendador, Asilo and resolutions reveals that Mayor Comendador was only
Angeles for violation of Sec. 3(e) of Republic Act No. authorized to file an unlawful detainer case in case of
3019 otherwise known as the "Anti-Graft and Corrupt resistance to obey the order or to demolish the building
Practices Act" before the Office of the Ombudsman. using legal means. Clearly, the act of demolition
Sandiganbayan rendered a decision, finding the without legal order in this case was not among those
accused Demetrio T. Comendador and Paulino S. provided by the resolutions, as indeed, it is a legally
Asilo, Jr. guilty beyond reasonable doubt of violation of impossible provision.
Sec. 3(e) of Republic Act. No. 3019.
2. The amount of actual damages prayed for is
The counsel for the late Mayor also filed its Motion for unconscionable.
Reconsideration alleging that the death of the late
Mayor had totally extinguished both his criminal and To seek recovery of actual damages, it is necessary to
civil liability. The Sandiganbayan granted the extinction prove the actual amount of loss with a reasonable
of the criminal liability is concerned and denied the degree of certainty, premised upon competent proof
extinction of the civil liability holding that the civil action and on the best evidence obtainable. n this case, the
is an independent civil action. Hence, these Petitions Court finds that the only evidence presented to prove
for Review on Certiorari. the actual damages incurred was the itemized list of
damaged and lost items prepared by Engineer next day and went to the house of a certain Julie to
Cabrega, an engineer commissioned by the Spouses whom AAA narrated what happened to her.
Bombasi to estimate the costs.
Accused-appellant interpose alibi and denial as his
The amount claimed by the respondent-claimant’s defense. He avers that it is impossible for him to have
witness as to the actual amount of damages "should be committed the crime as he was away their house for
admitted with extreme caution considering that, work and that AAA was only manipulated by BBB to
because it was a bare assertion, it should be supported have false charges against him since he allegedly
by independent evidence." Whatever claim the caught BBB with another man.
respondent witness would allege must be appreciated
in consideration of his particular self-interest. There ISSUE:
must still be a need for the examination of the Is the accused-appellant guilty of the crime of qualified
documentary evidence presented by the claimants to rape against his daughter?
support its claim with regard to the actual amount of
damages. The price quotation made by Engineer HELD:
Cabrega presented as an exhibit partakes of the nature YES, the prosecution established all the elements to
of hearsay evidence considering that the person who constitute qualified rape. The elements of rape under
issued them was not presented as a witness. Article 266-A, paragraph (1)(a) of the Revised Penal
Code, as amended, are: (1) that the offender had
People of the Philippines v. Anastacio Amistoso y carnal knowledge of a woman; and (2) that such act
Broca was accomplished through force, threat, or
G.R. No. 201447, January 9, 2013 intimidation. However, when the offender is the victim’s
FACTS: father, there need not be actual force, threat, or
Accused-appellant Amistoso was charged with the intimidation because the moral and physical dominion
crime of qualified rape under Article 266-A par. d. The of the father is sufficient to cow the victim into
RTC and CA convicted him of the crime charged. submission to his beastly desires. His moral
ascendancy or influence over the latter substitutes for
The victim, AAA, is the second of five children of violence and intimidation.
Amistoso and BBB. She was exactly 12 years, one
month and eight days old when Amistoso committed To raise the crime of simple rape to qualified rape
the crime of qualified rape against her. One morning, under Article 266-B, paragraph (1) of the Revised
Amistoso got mad at AAA because she refused to go Penal Code, as amended, the twin circumstances of
with her father to the forest to get a piece of wood minority of the victim and her relationship to the
which Amistoso would use as a handle for his bolo. offender must concur. In the case at bar, the foregoing
Because of this, a quarrel erupted between Amistoso elements of qualified rape under Article 266-A,
and BBB. In his fury, Amistoso attempted to hack AAA. paragraph (1)(a), in relation to Article 266-B ,
BBB ran away with her other children to her mother’s paragraph (1), of the Revised Penal Code, as
house in another barangay. AAA, however, stayed amended, are sufficiently alleged in the Information
behind because she was afraid that Amistoso would against Amistoso, viz: (1) Amistoso succeeded in
get even madder at her. having carnal knowledge of AAA against her will and
without her consent; (2) AAA was 12 years old on the
That night, AAA was awakened when Amistoso, day of the alleged rape; and (3) Amistoso is AAA’s
already naked, mounted her. Amistoso reached under father.
AAA’s skirt and removed her panties. AAA shouted,
“Pa, ayaw man!” (Pa, please don’t!), but Amistoso The Court finds that the prosecution was able to
merely covered AAA’s mouth with one hand. Amistoso successfully establish all the elements of the crime.
then inserted his penis inside AAA’s vagina. The pain Accused-appellants defense of denial and alibi cannot
AAA felt made her cry. After he had ejaculated, prevail over the victim’s clear, consistent, and credible
Amistoso stood up. AAA noticed white substance and account of the events of the incident in a
blood coming from her vagina. Amistoso told AAA not straightforward and candid manner. As such, accused-
to tell anyone what happened between them, appellant’s guilt of the crime of qualified rape is proven
otherwise, he would kill her. AAA left their house the beyond reasonable doubt
psba vs ca digest necessary tools and skills to pursue higher education
FACTS: Carlitos Bautista was a third year student at or a profession. This includes ensuring the safety of
the Philippine School of Business Administration. the students while in the school premises. On the other
Assailants, who were not members of the schools hand, the student covenants to abide by the school's
academic community, while in the premises of PSBA, academic requirements and observe its rules and
stabbed Bautista to death. This incident prompted his regulations.
parents to file a suit against PSBA and its corporate
officers for damages due to their alleged negligence, Failing on its contractual and implied duty to ensure the
recklessness and lack of security precautions, means safety of their student, PSBA is therefore held liable for
and methods before, during and after the attack on the his death.
victim.
Petition denied.
The defendants filed a motion to dismiss, claiming that
the compliant states no cause of action against them amadora vs ca
based on quasi-delicts, as the said rule does not cover
academic institutions. The trial court denied the motion In April 1972, while the high school students of Colegio
to dismiss. Their motion for reconsideration was de San Jose-Recoletos were in the school auditorium,
likewise dismissed, and was affirmed by the appellate
a certain Pablito Daffon fired a gun. The stray bullet hit
court. Hence, the case was forwarded to the Supreme
Alfredo Amadora. Alfredo died. Daffon was convicted of
Court.
reckless imprudence resulting in homicide. The parents
ISSUE: Whether or not PSBA is liable for the death of of Alfredo sued the school for damages under Article
the student. 2180 of the Civil Code because of the school’s
negligence
RULING: Because the circumstances of the present
case evince a contractual relation between the PSBA
.
and Carlitos Bautista, the rules on quasi-delict do not
really govern. A perusal of Article 2176 shows that
The trial court ruled in favor of Amadora. The trial court
obligations arising from quasi-delicts or tort, also
known as extra-contractual obligations, arise only ruled that the principal, the dean of boys, as well as the
between parties not otherwise bound by contract, teacher-in-charge are all civilly liable. The school
whether express or implied. However, this impression appealed as it averred that when the incident
has not prevented this Court from determining the happened, the school year has already ended.
existence of a tort even when there obtains a contract. Amadora argued that even though the semester has
already ended, his son was there in school to complete
Article 2180, in conjunction with Article 2176 of the Civil
a school requirement in his Physics subject. The Court
Code, establishes the rule in in loco parentis. Article
2180 provides that the damage should have been of Appeals ruled in favor of the school. The CA ruled
caused or inflicted by pupils or students of the that under the last paragraph of Article 2180, only
educational institution sought to be held liable for the schools of arts and trades (vocational schools) are
acts of its pupils or students while in its custody. liable not academic schools like Colegio de San Jose-
However, this material situation does not exist in the Recoletos.
present case for, as earlier indicated, the assailants of
Carlitos were not students of the PSBA, for whose acts
the school could be made liable. But it does not
necessarily follow that PSBA is absolved form liability.
ISSUE: Whether or not Colegio de San Jose-
When an academic institution accepts students for Recoletos, an academic school, is liable under Article
enrollment, there is established a contract between 2180 of the Civil Code for the tortuous act of its
them, resulting in bilateral obligations which both students.
parties is bound to comply with. For its part, the school
undertakes to provide the student with an education
that would presumably suffice to equip him with the
HELD: Yes. The Supreme Court made a re- begun or has already ended at the time of the
examination of the provision on the last paragraph of happening of the incident. As long as it can be shown
Article 2180 which provides: that the student is in the school premises in pursuance
of a legitimate student objective, in the exercise of a
legitimate student right, and even in the enjoyment of a
legitimate student right, and even in the enjoyment of a
Lastly, teachers or heads of establishments of arts and
legitimate student privilege, the responsibility of the
trades shall be liable for damages caused by their
pupils and students or apprentices so long as they school authorities over the student continues. Indeed,
remain in their custody. even if the student should be doing nothing more than
relaxing in the campus in the company of his
The Supreme Court said that it is time to update the classmates and friends and enjoying the ambience and
interpretation of the above law due to the changing atmosphere of the school, he is still within the custody
times where there is hardly a distinction between and subject to the discipline of the school authorities
schools of arts and trade and academic schools. That under the provisions of Article 2180.
being said, the Supreme Court ruled that ALL schools,
academic or not, may be held liable under the said
provision of Article 2180.
At any rate, the REMEDY of the teacher, to avoid direct
The Supreme Court however clarified that the school, liability, and for the school, to avoid subsidiary liability,
whether academic or not, should not be held directly is to show proof that he, the teacher, exercised the
liable. Its liability is only subsidiary. necessary precautions to prevent the injury complained
of, and the school exercised the diligence of a bonus
pater familias.
FACTS
- Petitioner Khe Hong Cheng, alias Felix Khe, is the owner of Butuan
Shipping Lines.- The Philippine Agricultural Trading Corporation
shipped on board the vessel M/VPRINCE ERIC, owned by petitioner
The Supreme Court also ruled that such liability does Khe Hong Cheng, 3,400 bags of copra atMasbate, Masbate, for
delivery to Dipolog City, Zamboanga del Norte.
not cease when the school year ends or when the - The said shipment of copra was covered by a marine insurance
semester ends. Liability applies whenever the student policy issued byAmerican Home Insurance Company (respondent
Philam's assured).
is in the custody of the school authorities as long as he - M/V PRINCE ERIC sank somewhere between Negros Island and
NortheasternMindanao, resulting in the total loss of the shipment.
is under the control and influence of the school and Because of the loss, theinsurer, American Home, paid the amount of
within its premises, whether the semester has not yet P354,000.00 (the value of the copra)to the consignee.
- Having been subrogated into the rights of the consignee, American - Art. 1383. An action for rescission is subsidiary; it cannot be
Homeinstituted a civil case to recover the money paid to the instituted except when the party suffering damage has no other legal
consignee, based on breachof contract of carriage. means to obtain reparation for the same.
- While the case was still pending, or on December 20, 1989, -An action to rescind or an accionpauliana must be of last resort,
petitioner Khe HongCheng executed deeds of donations of parcels of availed of onlyafter all other legal remedies have been exhausted
land in favor of his children, hereinco-petitioners Sandra Joy and Ray and have been proven futile.
Steven.
- The trial court rendered judgment against petitioner in the civil case Foran accionpauliana to accrue, the following requisites must
on December29, 1993, four years after the donations were made concur:
and the TCTs were registered inthe donees’ names ordering him to
pay herein respondents.- After the said decision became final and 1) That the plaintiff asking for rescission has a credit prior to the
executory, a writ of execution wasforthwith. Said writ of execution, alienation,although demandable later;
however, was not served. An alias writ of execution was, thereafter,
applied for and granted.- Despite earnest efforts, the sheriff found no 2) That the debtor has made a subsequent contractconveying a
property under the name of ButuanShipping Lines and/or petitioner patrimonial benefit to a third person;
Khe Hong Cheng to levy or garnish for thesatisfaction of the trial
court's decision. When the sheriff, accompanied by counselof 3) That the creditor has no otherlegal remedy to satisfy his claim, but
respondent Philam, went to Butuan City on January 17, 1997, to would benefit by rescission of the conveyance to the third person;
enforce the aliaswrit of execution, they discovered that petitioner Khe
Hong Cheng no longer hadany property and that he had conveyed 4) That the act being impugned is fraudulent;
the subject properties to his children.
- Respondent Philam filed a complaint for the rescission of the deeds 5) That the thirdperson who received the property conveyed, if by
of donationexecuted by petitioner Khe Hong Cheng in favor of his onerous title, has been anaccomplice in the fraud.
children and for thenullification of their titles. Respondent Philam
alleged, that petitioner executed theaforesaid deeds in fraud of his - An accionpaulianathus presupposes the following:
creditors, including respondent Philam.
1) A judgment;
Petitioners’ Claim 2) the issuanceby the trial court of a writ of execution for the
Petitioners moved for its dismissal on the ground that theaction had satisfaction of the judgment, and 3)the failure of the sheriff to enforce
already prescribed. They posited that the registration of the deeds of and satisfy the judgment of the court. It requires that the creditor has
donation on December 27, 1989 constituted constructive notice and exhausted the property of the debtor. The date of the decision of the
since thecomplaint a quo was filed only on February 25, 1997, or trial court is immaterial. What is important is that the credit of the
more than four (4) yearsafter said registration, the action was already plaintiffantedates that of the fraudulent alienation by the debtor of his
barred by prescription.- The trial court denied the motion to dismiss. property. After all,the decision of the trial court against the debtor will
It held that respondent Philam'scomplaint had not yet prescribed. retroact to the time when thedebtor became indebted to the creditor.
According to the trial court, the prescriptiveperiod began to run only
from December 29, 1993, the date of the decision of thetrial court in Reasoning
Civil Case No. 13357 Petitioners argument that the Civil Code must yield to the
Mortgageand Registration Laws is misplaced, for in no way does this
- On appeal by petitioners, the CA affirmed the trial court's decision imply that the specificprovisions of the former may be all together
in favor of respondent Philam. The CA declared that the action to ignored. To count the four yearprescriptive period to rescind an
rescind the donations hadnot yet prescribed. Citing Articles 1381 and allegedly fraudulent contract from the date of registration of the
1383 of the Civil Code, the CA ruledthat the four year period to conveyance with the Register of Deeds, as alleged by thepetitioners,
institute the action for rescission began to run only in January 1997, would run counter to Article 1383 of the Civil Code as well as settled
and not when the decision in the civil case became final jurisprudence. It would likewise violate the third requisite to file an
andexecutory on December 29, 1993. The CA reckoned the accrual action for rescission of an allegedly fraudulent conveyance of
of respondentPhilam's cause of action on January 1997, the time property, i.e., the creditor hasno other legal remedy to satisfy his
when it first learned that the judgment award could not be satisfied claim.- Even if respondent Philam was aware, as of December 27,
because the judgment creditor, petitionerKhe Hong Cheng, had no 1989, that petitionerKhe Hong Cheng had executed the deeds of
more properties in his name. Prior thereto, respondentPhilam had donation in favor of his children, thecomplaint against Butuan
not yet exhausted all legal means for the satisfaction of the decision Shipping Lines and/or petitioner Khe Hong Cheng was stillpending
inits favor, as prescribed under Article 1383 of the Civil Code.- before the trial court. Respondent Philam had no inkling, at the time,
Petitioners’ motion for reconsideration was likewise dismissed in the thatthe trial court's judgment would be in its favor and further, that
appellatecourt's resolution dated July 11, 2000. such judgmentwould not be satisfied due to the deeds of donation
executed by petitioner KheHong Cheng during the pendency of the
ISSUE case. Had respondent Philam filed hiscomplaint on December 27,
1. WON the action to rescind the donations has already prescribed. 1989, such complaint would have been dismissed forbeing
2. When did the four (4) year prescriptive period as provided for in premature. Not only were all other legal remedies for the
Article 1389 of the Civil Code for respondent Philam to file its action enforcement of respondent Philam’s claims not yet exhausted at the
for rescission of the subjectdeeds of donation commence to run? time the deeds of donationwere executed and registered.
Respondent Philam would also not have been able toprove then that
petitioner Khe Hong Chneg had no more property other than
thosecovered by the subject deeds to satisfy a favorable judgment
HELD by the trial court.It bears stressing that petitioner Khe Hong Cheng
1. NO. The action to rescind the donations has already prescribed. even expressly declared andrepresented that he had reserved to
Ratio himself property sufficient to answer for his debts
Article 1389 of the Civil Code simply provides that, “The action to -Respondent Philam only learned about the unlawful conveyances
claimrescission must be commenced within four years.” Since this made bypetitioner Khe Hong Cheng in January 1997 when its
provision of law issilent as to when the prescriptive period would counsel accompanied thesheriff to Butuan City to attach the
commence, the general rule, i.e,from the moment the cause of action properties of petitioner Khe Hong Cheng. Therethey found that he no
accrues, therefore, applies.- Art. 1150. The time for prescription for longer had any properties in his name. It was only then
all kinds of actions, when there is nospecial provision which ordains thatrespondent Philam's action for rescission of the deeds of
otherwise, shall be counted from the day they maybe brought. donation accrued becausethen it could be said that respondent
2. The Court enunciated the principle that it is the legal possibility of Philam had exhausted all legal means tosatisfy the trial court's
bringing theaction which determines the starting point for the judgment in its favor. Since respondent Philam filed itscomplaint for
computation of the prescriptiveperiod for the action. accionpauliana against petitioners on February 25, 1997, barely
amonth from its discovery that petitioner Khe Hong Cheng had no
other property tosatisfy the judgment award against him, its action for
rescission of the subjectdeeds clearly had not yet prescribed. DECISION OF LOWER COURTS: * trial court: ordered payment of
Disposition damages, jointly and severally * CA: affirmed trial court.
The petition was DENIED for lack of merit
ISSUES AND RULING:
Maria Antonia Siguan vs. Rosa Lim, Linde Lim, Ingrid Lim and (a) whether or not a claim for damage sustained on a shipment of
Neil Lim318SCRA 725; G.R. No. 134685; November 19, 1999 goods can be a solidary, or joint and several, liability of the common
carrier, the arrastre operator and the customs broker;
Facts:
A criminal case was filed against LIM with RTC-Cebu city for issuing YES, it is solidary. Since it is the duty of the ARRASTRE to take
2 bouncing checks in the amounts of P300,000 and P241,668, good care of the goods that are in its custody and to deliver them in
respectively to SiguanMeanwhile, on 2 July 1991, a Deed of good condition to the consignee, such responsibility also devolves
Donation conveying the following parcels of land and purportedly upon the CARRIER. Both the ARRASTRE and the CARRIER are
executed by LIM on 10 August 1989 in favor of her children, Linde, therefore charged with the obligation to deliver the goods in good
Ingrid and Neil, was registered with the Office of the Register of condition to the consignee.
Deeds of Cebu City. New transfer certificates of title were thereafter
issued in the names of the donees. On 23 June 1993, petitioner filed The common carrier's duty to observe the requisite diligence in the
an accionpauliana against LIM and her children before RTC-Cebu shipment of goods lasts from the time the articles are surrendered to
City to rescind the questioned Deed of Donation and to declare as or unconditionally placed in the possession of, and received by, the
null and void the new transfer certificates of title issued for the lots carrier for transportation until delivered to, or until the lapse of a
covered by the questioned Deed. reasonable time for their acceptance by, the person entitled to
receive them (Arts. 1736-1738, Civil Code; Ganzon vs. Court of
Petitioner’s contention: claimed therein that sometime in July 1991, Appeals, 161 SCRA 646; Kui Bai vs. Dollar Steamship Lines, 52 Phil.
LIM, through a Deed of Donation, fraudulently transferred all her real 863). When the goods shipped either are lost or arrive in damaged
property to her children in bad faith and in fraud of creditors, condition, a presumption arises against the carrier of its failure to
including her; that LIM conspired and confederated with her children observe that diligence, and there need not be an express finding of
in antedating the questioned Deed of Donation, to petitioner's and negligence to hold it liable.
other creditors' prejudice; and that LIM, at the time of the fraudulent
conveyance, left no sufficient properties to pay her obligations. (b) whether the payment of legal interest on an award for loss or
damage is to be computed from the time the complaint is filed or
LIM’s contention: As regards the questioned Deed of Donation, LIM from the date the decision appealed from is rendered; and
maintained that it was not antedated but was made in good faith at a
time when she had sufficient property. Finally, she alleged that the FOLLOW THESE VERY IMPORTANT RULES (GUIDANCE BY THE
Deed of Donation was registered onlyon 2 July 1991 because she SUPREME COURT)
was seriously ill
I. When an obligation, regardless of its source, i.e., law, contracts,
Issue: Whether the Deed of Donation executed by Rosa Lim (LIM) in quasi-contracts, delicts or quasi-delicts is breached, the contravenor
favor of her children be rescinded for being in fraud of petitioner can be held liable for damages. The provisions under Title XVIII on
Maria Antonia Siguan? "Damages" of the Civil Code govern in determining the measure of
recoverable damages.
Ruling:
Even assuming arguendo that petitioner became a creditor of LIM II. With regard particularly to an award of interest in the concept of
prior to the celebration of the contract of donation, still her action for actual and compensatory damages, the rate of interest, as well as
rescission would not fare well because the third requisite was not the accrual thereof, is imposed, as follows:
met. Under Article 1381 of the Civil Code, contracts entered into in
fraud of creditors may be rescinded only when the creditors cannot in 1. When the obligation is breached, and it consists in the payment of
any manner collect the claims due them. Also, Article 1383 of the a sum of money, i.e., a loan or forbearance of money, the interest
same Code provides that the action for rescission is but a subsidiary due should be that which may have been stipulated in writing.
remedy which cannot be instituted except when the party suffering Furthermore, the interest due shall itself earn legal interest from the
damage has no other legal means to obtain reparation for the same. time it is judicially demanded. In the absence of stipulation, the rate
The term "subsidiary remedy" has been defined as "the exhaustion of interest shall be 12% per annum to be computed from default, i.e.,
of all remedies by the prejudiced creditor to collect claims due him from judicial or extrajudicial demand under and subject to the
before rescission is resorted to." It is, therefore, "essential that the provisions of Article 1169 of the Civil Code.
party asking for rescission prove that he has exhausted all other
legal means to obtain satisfaction of his claim. Petitioner neither 2. When an obligation, not constituting a loan or forbearance of
alleged nor proved that she did so. On this score, her action for the money, is breached, an interest on the amount of damages awarded
rescission of the questioned deed is not maintainable even if the may be imposed at the discretion of the court at the rate of 6% per
fraud charged actually did exist." annum. No interest, however, shall be adjudged on unliquidated
claims or damages except when or until the demand can be
(Credit Transactions) established with reasonable certainty. Accordingly, where the
EASTERN SHIPPING LINES, INC., , vs. HON. COURT OF demand is established with reasonable certainty, the interest shall
APPEALS AND MERCANTILE INSURANCE COMPANY, INC., begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty cannot
This is an action against defendants shipping company, arrastre be so reasonably established at the time the demand is made, the
operator and broker-forwarder for damages sustained by a shipment interest shall begin to run only from the date the judgment of the
while in defendants' custody, filed by the insurer-subrogee who paid court is made (at which time the quantification of damages may be
the consignee the value of such losses/damages. deemed to have been reasonably ascertained). The actual base for
the computation of legal interest shall, in any case, be on the amount
the losses/damages were sustained while in the respective and/or finally adjudged.
successive custody and possession of defendants carrier (Eastern),
arrastre operator (Metro Port) and broker (Allied Brokerage). 3. When the judgment of the court awarding a sum of money
becomes final and executory, the rate of legal interest, whether the
As a consequence of the losses sustained, plaintiff was compelled to case falls under paragraph 1 or paragraph 2, above, shall be 12%
pay the consignee P19,032.95 under the aforestated marine per annum from such finality until its satisfaction, this interim period
insurance policy, so that it became subrogated to all the rights of being deemed to be by then an equivalent to a forbearance of credit.
action of said consignee against defendants.
(c) whether the applicable rate of interest, referred to above, is promulgation of the BangkoSentral ng Pilipinas Monetary Board
twelve percent (12%) or six percent (6%). Resolution No. 796 which lowered the legal rate of interest from 12%
to 6%. Specifically, the rules on interest are now as follows:
SIX PERCENT (6%) on the amount due computed from the decision,
dated 03 February 1988, of the court a quo (Court of Appeals) AND A 1. Monetary Obligations ex. Loans:
TWELVE PERCENT (12%) interest, in lieu of SIX PERCENT (6%),
shall be imposed on such amount upon finality of the Supreme Court a. If stipulated in writing:
decision until the payment thereof.
a.1. shall run from date of judicial demand (filing of the case)
RATIO: when the judgment awarding a sum of money becomes final
and executory, the monetary award shall earn interest at 12% per a.2. rate of interest shall be that amount stipulated
annum from the date of such finality until its satisfaction, regardless
of whether the case involves a loan or forbearance of money. The b. If not stipulated in writing
reason is that this interim period is deemed to be by then equivalent
to a forbearance of credit. b.1. shall run from date of default (either failure to pay upon extra-
judicial demand or upon judicial demand whichever is appropriate
NOTES: the Central Bank Circular imposing the 12% interest per and subject to the provisions of Article 1169 of the Civil Code)
annum applies only to loans or forbearance of money, goods or
credits, as well as to judgments involving such loan or forbearance of b.2. rate of interest shall be 6% per annum
money, goods or credits, and that the 6% interest under the Civil
Code governs when the transaction involves the payment of 2. Non-Monetary Obligations (such as the case at bar)
indemnities in the concept of damage arising from the breach or a
delay in the performance of obligations in general. Observe, too, that a. If already liquidated, rate of interest shall be 6% per annum,
in these cases, a common time frame in the computation of the 6% demandable from date of judicial or extra-judicial demand (Art.
interest per annum has been applied, i.e., from the time the 1169, Civil Code)
complaint is filed until the adjudged amount is fully paid.
b. If unliquidated, no interest
703 SCRA 439 – Civil Law – Torts and Damages – Actual and Except: When later on established with certainty. Interest shall still be
Compensatory Damages – Legal Rate of Interest is now 6% 6% per annum demandable from the date of judgment because such
Labor Law – Labor Relations – Illegal Dismissal – Computation of on such date, it is already deemed that the amount of damages is
Monetary Benefits already ascertained.
After the finality of the SC decision, Nacar filed a motion before the – Final and executory judgments awarding damages prior to July 1,
LA for recomputation as he alleged that his backwages should be 2013 shall apply the 12% rate;
computed from the time of his illegal dismissal (January 24, 1997)
until the finality of the SC decision (May 27, 2002) with interest. The – Final and executory judgments awarding damages on or after July
LA denied the motion as he ruled that the reckoning point of the 1, 2013 shall apply the 12% rate for unpaid obligations until June 30,
computation should only be from the time Nacar was illegally 2013; unpaid obligations with respect to said judgments on or after
dismissed (January 24, 1997) until the decision of the LA (October July 1, 2013 shall still incur the 6% rate.
15, 1998). The LA reasoned that the said date should be the
reckoning point because Nacar did not appeal hence as to him, that
decision became final and executory. Advocates for Truth in Lending Act Vs BSP
facts
ISSUE: Whether or not the Labor Arbiter is correct. "Advocates for Truth in Lending, Inc." (AFTIL) is a non-profit, non-
stock corporation organized to engage in pro bono concerns and
HELD: No. There are two parts of a decision when it comes to illegal activities relating to money lending issues. It was incorporated on
dismissal cases (referring to cases where the dismissed employee July 9, 2010,and a month later, it filed this petition, joined by its
wins, or loses but wins on appeal). The first part is the ruling that the founder and president, Eduardo B. Olaguer, suing as a taxpayer and
employee was illegally dismissed. This is immediately final even if a citizen.
the employer appeals – but will be reversed if employer wins on HISTORY OF CENTRAL BANK’S POWER TO FIX MAX INTEREST
appeal. The second part is the ruling on the award of backwages RATES
and/or separation pay. For backwages, it will be computed from the 1. R.A. No. 265, which created the Central Bank on June 15,
date of illegal dismissal until the date of the decision of the Labor 1948, empowered the CB-MB toset the maximum interest rates
Arbiter. But if the employer appeals, then the end date shall be which banks may charge for all types of loans and other credit
extended until the day when the appellate court’s decision shall operations.
become final. Hence, as a consequence, the liability of the employer, 2. The Usury Law was amended by P.D.1684, giving the CB-MB
if he loses on appeal, will increase – this is just but a risk that the authority to prescribe different maximum rates of interest which may
employer cannot avoid when it continued to seek recourses against be imposed for a loan or renewal thereof or the forbearance of any
the Labor Arbiter’s decision. This is also in accordance with Article money, goods or credits, provided that the changes are effected
279 of the Labor Code. gradually and announced in advance. Section 1-a of Act No. 2655
now reads:
Anent the issue of award of interest in the form of actual or 3. In its Resolution No. 2224 dated December 3, 1982, the CB-
compensatory damages, the Supreme Court ruled that the old case MB issued CB Circular No. 905, Series of 1982, effective on January
of Eastern Shipping Lines vs CA is already modified by the
1, 1983. It removed the ceilings on interest rates on loans or RA 265 covered only banks while Section 1-a of the Usury Law,
forbearance of any money, goods or credits: empowers the Monetary Board, BSP for that matter, to prescribe the
Sec. 1. The rate of interest, including commissions, premiums, fees maximum rate or rates of interest for all loans or renewals thereof or
and other charges, on a loan or forbearance of any money, goods, or the forbearance of any money, good or credits …
credits, regardless of maturity and whether secured or unsecured, The Usury Law is broader in scope than RA 265, now RA 7653, the
that may be charged or collected by any person, whether natural or later merely supplemented the former as it provided regulation for
juridical, shall not be subject to any ceiling prescribed under or loans by banks and other financial institutions. RA 7653 was not
pursuant to the Usury Law, as amended. unequivocally repealed by RA 765.
4. R.A. No. 7653 establishing the BSP replaced the CB: CB Circular 905 is essentially based on Section 1-a of the Usury Law
Sec. 135. Repealing Clause. — Except as may be provided for in and the Usury Law being broader in scope than the law that created
Sections 46 and 132 of this Act, Republic Act No. 265, as amended, the Central Bank was not deemed repealed when the law replacing
the provisions of any other law, special charters, rule or regulation CB with the BangkoSentral was enacted despite the non-
issued pursuant to said Republic Act No. 265, as amended, or parts reenactment in the BSP Law of a provision in the CB Law which the
thereof, which may be inconsistent with the provisions of this Act are petitioners purports to be the basis of Circular 905. Maguloba?
hereby repealed. Presidential Decree No. 1792 is likewise repealed. Hahaha. Basta the present set up is: The power of the BSP
Note: R.A. 7653 – the law that created BSP to replace CB – Note: Monetary Board to determine interest rates emanates from the Usury
this law did not retain the same provision as that of Section 109 in Law [which was further specified by Circular 905].
RA 265. Granting that the CB had power to "suspend" the Usury Law, the
PETITIONER’S ARGUMENTS new BSP-MB did not retain this power of its predecessor, in view of
· To justify their skipping the hierarchy of courts petitioners Section 135 of R.A. No. 7653, which expressly repealed R.A. No.
contend the transcendental importance of their Petition: 265. The petitioners point out that R.A. No. 7653 did not reenact a
a) CB-MB statutory or constitutional authority to prescribe the provision similar to Section 109 of R.A. No. 265.
maximum rates of interest for all kinds of credit transactions and A closer perusal shows that Section 109 of R.A. No. 265 covered
forbearance of money, goods or credit beyond the limits prescribed only loans extended by banks, whereas under Section 1-a of the
in the Usury Law; Usury Law, as amended, the BSP-MB may prescribe the maximum
b) If so, whether the CB-MB exceeded its authority when it rate or rates of interest for all loans or renewals thereof or the
issued CB Circular No. 905, which removed all interest ceilings and forbearance of any money, goods or credits, including those for loans
thus suspended Act No. 2655 as regards usurious interest rates; of low priority such as consumer loans, as well as such loans made
c) Whether under R.A. No. 7653, the new BSP-MB may by pawnshops, finance companies and similar credit institutions. It
continue to enforce CB Circular No. 905. even authorizes the BSP-MB to prescribe different maximum rate or
· Petitioners contend that under Section 1-a of Act No. 2655, as rates for different types of borrowings, including deposits and deposit
amended by P.D. No. 1684, the CB-MB was authorized only to substitutes, or loans of financial intermediaries.
prescribe or set the maximum rates of interest for a loan or renewal Act No. 2655, an earlier law, is much broader in scope, whereas R.A.
thereof or for the forbearance of any money, goods or credits, and to No. 265, now R.A. No. 7653, merely supplemented it as it concerns
change such rates whenever warranted by prevailing economic and loans by banks and other financial institutions. Had R.A. No. 7653
social conditions, the changes to be effected gradually and on been intended to repeal Section 1-a of Act No. 2655, it would have
scheduled dates; that nothing in P.D. No. 1684 authorized the CB- so stated in unequivocal terms.
MB to lift or suspend the limits of interest on all credit transactions, Moreover, the rule is settled that repeals by implication are not
when it issued CB Circular No. 905. They further insist that under favored, because laws are presumed to be passed with deliberation
Section 109 of R.A. No. 265, the authority of the CB-MB was clearly and full knowledge of all laws existing pertaining to the subject.An
only to fix the banks’ maximum rates of interest, but always within the implied repeal is predicated upon the condition that a substantial
limits prescribed by the Usury Law. conflict or repugnancy is found between the new and prior laws.
· CB Circular No. 905, which was promulgated without the Thus, in the absence of an express repeal, a subsequent law cannot
benefit of any prior public hearing, is void because it violated NCC 5 be construed as repealing a prior law unless an irreconcilable
which provides that "Acts executed against the provisions of inconsistency and repugnancy exists in the terms of the new and old
mandatory or prohibitory laws shall be void, except when the law laws. We find no such conflict between the provisions of Act 2655
itself authorizes their validity." and R.A. No. 7653.
· weeks after the issuance of CB Circular No. 905, the #generaliaspecialibus non derogant
benchmark 91-day Treasury bills shot up to 40% PA, as a result. The The lifting of the ceilings for interest rates does not authorize
banks followed suit and re-priced their loans to rates which were stipulations charging excessive, unconscionable, and iniquitous
even higher than those of the "Jobo" bills. interest.
· CB Circular No. 905 is also unconstitutional in light of the Bill In Castro v. Tan, the Court held that the imposition of unconscionable
of Rights, which commands that "no person shall be deprived of life, interest is immoral and unjust. It is tantamount to a repugnant
liberty or property without due process of law, nor shall any person spoliation and an iniquitous deprivation of property repulsive to the
be denied the equal protection of the laws." common sense of man.
· R.A. No. 7653 did not re-enact a provision similar to Section They are struck down for being contrary to morals, if not against the
109 of RA 265, and therefore, in view of the repealing clause in law, therefore deemed inexistent and void ab initio. However this
Section 135 of R.A. No. 7653, the BSP-MB has been stripped of the nullity does not affect the lender’s right to recover the principal of the
power either to prescribe the maximum rates of interest which banks loan nor affect the other terms thereof.
may charge for different kinds of loans and credit transactions, or to
suspend Act No. 2655 and continue enforcing CB Circular No. 905.
Ruling Gaite vs. Fonacier, [G.R. No. L-11827, July 31, 1961]
CB-MB merely suspended the effectivity of the Usury Law when it Facts: Defendant-appellant Fonacier was the owner/holder of 11 iron
issued CB Circular No. 905. lode mineral claims, known as the Dawahan Group, situated in
In Medel v. CA, it was said that the circular did not repeal nor amend Camrines Norte.
the Usury Law but simply suspended its effectivity; that a Circular
cannot repeal a low; that by virtue of CB the Usury Law has been By “Deed of Assignment, Respondent constituted and appointed
rendered ineffective; that the Usury has been legally non-existent in plaintiff-appellee Gaite as attorney-in-fact to enter into contract for
our jurisdiction and interest can now be charged as lender and the exploration and development of the said mining claims on. On
borrow may agree upon. March 1954, petitioner executed a general assignment conveying the
Circular upheld the parties’ freedom of contract to agree freely on the claims into the Larap Iron Mines, which owned solely and belonging
rate of interest citing Art. 1306 under which the contracting parties to him. Thereafter, he underwent development and the exploitation
may establish such stipulations, clauses terms and conditions as for the mining claims which he estimates to be approximately 24
they may deem convenient provided they are not contrary to law, metric tons of iron ore.
morals, good customs, public order or public policy.
BSP-MB has authority to enforce CB Circular No. 905. However, Fonacier decide to revoke the authority given to Gaite,
whereas respondent assented subject to certain conditions.
Consequently a revocation of Power of Attorney and Contract was Under paragraphs 2 and 3 of Article 1198 of the Civil Code of the
executed transferring P20k plus royalties from the mining claims, all Philippines: ART. 1198. The debtor shall lose every right to make use
rights and interest on the road and other developments done, as well of the period: “(2) When he does not furnish to the creditor the
as , the right to use of the business name, goodwill, records, guaranties or securities which he has promised. (3) When by his own
documents related to the mines. Furthermore, included in the acts he has impaired said guaranties or securities after their
transfer was the rights and interest over the 24K+ tons of iron ore establishment, and when through fortuitous event they disappear,
that had been extracted. Lastly the balance of P65K was to be paid unless he immediately gives new ones equally satisfactory.”
for covering the first shipment of iron ores.
Appellants' failure to renew or extend the surety company's bond
To secure the payment of P65k, respondent executed a surety bond upon its expiration plainly impaired the securities given to the creditor
with himself as principal, the Larap Mines and Smelting Co. and its (appellee Gaite), unless immediately renewed or replaced.
stockholder as sureties. Yet, this was refused by petitioner. Appelle
further required another bond underwritten by a bonding company to Nevertheless, there is no merit in appellants' argument that Gaite's
secure the payment of the balance. Hence a second bond was acceptance of the surety company's bond with full knowledge that on
produced with Far Eastern Surety as an additional surety, provided its face it would automatically expire within one year was a waiver of
the liability of Far Eastern would only prosper when there had been its renewal after the expiration date. No such waiver could have been
an actual sale of the iron ores of not less than the agreed amount of intended, for Gaite stood to lose and had nothing to gain barely; and
P65k, moreover, its liability was to automatically expire on December if there was any, it could be rationally explained only if the appellants
1955. had agreed to sell the ore and pay Gaite before the surety
company's bond expired on December 8, 1955. But in the latter case
On December 1955, the second bond had expired and no sale the defendants-appellants' obligation to pay became absolute after
amounting to the stipulation as prior agreed nor had the balance one year from the transfer of the ore to Fonacier by virtue of the
been paid to petitioner by respondent. Thus such failure, prompted deed, first bond.
petitioner to file a complaint in the CFI of Manila for the payment of
the balance and other damages. GONZALES VS THE HEIRS OF THOMAS AND PAULA CRUZ GR
No. 131784 September 16, 1999 FACTS:
The Trial Court ruled in favor of plaintiff ordering defendant to pay the On December 1, 1983, Paula Año Cruz together with the plaintiffs
balance of P65k with interest. Afterwards an appeal was affected by heirs of Thomas and Paula Cruz entered into a contract of lease with
the respondent where several motions were presented for resolution: the defendant, Felix L. Gonzales of a half portion of a land containing
a motion for contempt; two motions to dismiss the appeal for an area of 12 hectares, more or less, and an accretion of 2 hectares,
becoming moot and academic; motion for a new trial, filed by more or less, situated in Rodriguez Town, Province of Rizal‘ and
appellee Gaite. The motion for contempt was held unmeritorious, covered by Transfer Certificate of Title No. 12111.
while the rest of the motions were held unnecessary to resolve
As stipulated therein: Paragraph 9 - The LESSORS hereby commit
Issue: Whether or not the Lower Court erred in holding the obligation themselves and shall undertake to obtain a separate and distinct
of appellant Fonacier to pay appelleGaite the balance of P65k, as T.C.T. over the herein leased portion to the LESSEE within a
one with a period or term and not one with a suspensive condition; reasonable period of time which shall not in any case exceed four (4)
and that the term expired on December 1955 years, after which a new Contract shall be executed by the herein
parties which shall be thesame in all respects with this Contract of
Held: No error was found, affirming the decision of the lower court. Lease/Purchase insofar as the terms and conditions are concerned.
Gaite acted within his rights in demanding payment and instituting
this action one year from and after the contract was executed, either Under the contract, Gonzales paid the rental fees but did not choose
because the appellant debtors had impaired the securities originally to exercise the option of paying the one million purchase price. A
given and thereby forfeited any further time within which to pay; or letter was issued by one of the heirs to rescind the said contract
because the term of payment was originally of no more than one following breach and ordered Gonzales to vacate the premises within
year, and the balance of P65k, became due and payable thereafter. ten days. Gonzales did no vacate. A few days later Paula Cruz died.
A case was launched in Court by the heirs of Paula Cruz.
The Lower Court was legally correct in holding the shipment or sale
of the iron ore is not a condition or suspensive to the payment of the ISSUE: How must paragraph nine of the contract be interpreted in
balance of P65k, but was only a suspensive period or term. What enforcing the contract of lease?
characterizes a conditional obligation is the fact that its efficacy or
obligatory force as distinguished from its demandability, is RULING: If a stipulation in a contract admits of several meanings, it
subordinated to the happening of a future and uncertain event; so shall be understood as bearing that import most adequate to render
that if the suspensive condition does not take place, the parties it effectual. An obligation cannot be enforced unless the plaintiff has
would stand as if the conditional obligation had never existed. fulfilled the condition upon which it is premised. The ninth provision
was intended to ensure that respondents would have a valid title
The sale of the ore to Fonacier was a sale on credit, and not an overthe specific portion they were selling to petitioner. Only after the
aleatory contract where the transferor, Gaite, would assume the risk title is assured may the obligation to buy the land and to pay the
of not being paid at all; and that the previous sale or shipment of the sums stated in the Contract be enforcedwithin the period stipulated.
ore was not a suspensive condition for the payment of the balance of Verily, the petitioner‘s obligation to purchase has not yet ripened and
the agreed price, but was intended merely to fix the future date of the cannot be enforced until and unless respondents can prove their title
payment. to the property subject of the Contract. The ninth clause was the
condition precedent ofthe contract. Respondents cannot rescind the
While as to the right of Fonacier to insist that Gaite should wait for contract, because they have not caused the transfer of the TCT to
the sale or shipment of the ore before receiving payment; or, in other their names, which is a condition precedent to petitioner‘s obligation.
words, whether or not they are entitled to take full advantage of the This Court has held that ―there can be no rescission (or more
period granted them for making the payment. The appellant had properly, resolution) of an obligation as yet non-existent, because the
indeed have forfeited the right to compel Gaite to wait for the sale of suspensive condition has not happened.‖
the ore before receiving payment of the balance of P65,000.00,
because of their failure to renew the bond of the Far Eastern Surety Coronel v. CAOctober 7, 1996J. Melo
Company or else replace it with an equivalent guarantee. The
expiration of the bonding company's undertaking on December 8, Facts:
1955 substantially reduced the security of the vendor's rights as - On Jan. 19, 1985, the Coronels executed a document entitled
creditor for the unpaid P65,000.00, a security that Gaite considered “Receipt of DownPayment” in favor of Ramona Patricia Alcaraz
essential and upon which he had insisted when he executed the containing the following conditions appurtenant to the sale of their
deed of sale of the ore to Fonacier (first bond). house and lot:
1. Ramona will make a down payment of P50,000 upon execution of Art. 1181. In conditional obligations, the acquisition of rights, as well
the document aforestated. as the extinguishment of loss of those already acquired, shall
2. The Coronels will cause the transfer in their names of the title of depend upon the happening of the event which constitutes the
their property registered in the name of their deceased father, condition.
Constancio P. Coronel, upon receipt of the P50,000 down payment.
3. Upon the transfer in their names of the subject property, the - Since the condition contemplated by the parties which is the
Coronels will execute the deed of absolute sale in favor of Ramona issuance of a certificate of title in petitioners’ names was fulfilled on
and the latter will pay the former the whole balance of P1,190,000. Feb. 6, 1985, the respective obligations of the parties under the
contract of sale became mutually demandable, that is, petitioners, as
- On the same date, Concepcion Alcaraz, mother of Ramona, paid sellers, were obliged to present the transfer certificate of title already
the down payment of P50,000. On Feb. 6, 1985, the property in their names to private respondent Ramona Alcaraz, the buyer, and
originally registered in the name of the Coronels’ father was to immediately execute the said deed of absolute sale, while the
transferred in their names under TCT No. 327043. Subsequently, the buyer on her part, was obliged to forthwith pay the balance of the
Coronels sold the property covered by TCT No. 327043 to purchase price amounting to P1,190,000.
intervenor-appellant Mabanag for P1,580,000 after the latter paid
P300,000. For this reason, the Coronels canceled and rescinded the - It is also significant to note that in the first paragraph in page 9 of
contract with Ramona by depositing the down payment paid by their petition, petitioners conclusively admitted that:
Concepcion in the bank in trust for Ramona Patricia Alcaraz. A few 3. The petitioners-sellers Coronel bound themselves “to effect the
days later, Concepcion, et al., filed a complaint for specific transfer in our names from our deceased father Constancio P.
performance against the Coronels and caused the annotation of a Coronel, the transfer certificate of title immediately upon receipt of
notice of lispendens at the back of TCT No. 327403. Mabanag then the downpayment above- stated.” The sale was still subject to this
caused the annotation of a notice of adverse claim covering the suspensive condition - Petitioners themselves recognized that they
same property with the Registry of Deeds of Quezon City. The entered into a contract of sale subject to a suspensive condition.
Coronels executed a Deed of Absolute Sale over the subject
property in favor of Mabanag. A new title on the subject property was Only, they contend, continuing in the same paragraph, that:...
issued in the name of Mabanag under TCT No. 351582.
Had petitioners-sellers not complied with this condition of first
- The lower court rendered judgment for specific performance transferring the title to the property under their names, there could be
ordering the Coronels to execute in favor of Concepcion, et al., a no perfected contract of sale.- not aware that they have set their own
deed of absolute sale covering that parcel of land embraced in and trap for themselves, for Art. 1186 of the Civil Code expressly
covered by TCT No. 327403 (now TCT No. 331582) of the Registry provides that:
of Deeds for Quezon City, together with all theimprovements existing
thereon free from all liens and encumbrances and once Art. 1186. The condition shall be deemed fulfilled when the
accomplished, to immediately deliver the said document of sale to obligorvoluntarily prevents its fulfillment.
Concepcion, et al. Upon receipt thereof, Concepcion, et al., were
ordered to pay the Coronels the whole balance of the purchase price - Besides, it should be stressed and emphasized that what is more
amounting to P1,190,000 in cash. TCT No. 331582 in the name of controlling than these mere hypothetical arguments is the fact that
Mabanag was canceled and delivered tobe without force and effect. the condition herein referred to was actually and indisputably fulfilled
Further, the Coronels, Mabanag, and all other persons claiming on Feb. 6, 1985, when a new title was issued in the names of
under them were ordered to vacate the subject property and deliver petitioners as evidenced by TCT No. 327403.
possession thereof to Concepcion, et al. The claim for damages and
attorney’s fees filed by Concepcion, et al., as well as the - The inevitable conclusion is that on Jan. 19, 1985, as evidenced by
counterclaims by the Coronels and intervenors were dismissed. On the document denominated as “Receipt of Down Payment”, the
appeal, the Court fully agreed to the decision of the trial court. parties entered into acontract of sale subject only to the suspensive
condition that the sellers shall effect the issuance of new certificate
Issue: title from that of their father’s name to their names and that, on Feb.
WON petitioners and private respondents entered into a conditional 6, 1985, this condition was fulfilled.
contract of sale – YES
- We, therefore, hold that in accordance with Art. 1187 which
pertinently provides
Held: —Art. 1187. The effects of conditional obligations to give, once the
- What is clearly established by the plain language of the subject condition has been fulfilled, shall retroact to the day of the
document is that when the said “Receipt of Down Payment” was constitution of the obligation...
prepared and signed by the Coronels, the parties had agreed to a
conditional contract of sale, consummation of which is subject only to In obligations to do or not to do, the courts shall determine, in each
the successful transfer of the certificate of title from the name of case,the retroactive effect of the condition that has been complied
petitioners’ father, Constancio P. Coronel, to their names. The Court with.- the rights and obligations of the parties with respect to the
significantly notes that this suspensive condition was, in fact, fulfilled perfected contract of sale became mutually due and demandable as
on February 6, 1985. Thus, on said date, the conditional contract of of the time of fulfillment or occurrence of the suspensive condition on
sale between petitioners and private respondent Ramona became Feb. 6, 1985. As of that point in time, reciprocal obligations of both
obligatory, the only act required for the consummation thereof being seller and buyer arose.
the delivery of the property by means of the execution of the deed of
absolute sale ina public instrument, which petitioners unequivocally - When the sellers declared in the “Receipt of Down Payment” that
committed themselves to do as evidenced by the “Receipt of Down they received an amount as purchase price for their house and lot
Payment.” without any reservation of title until full payment of the entire
purchase price, the natural and ordinary idea conveyed is that they
- Art. 1475, in correlation with Art. 1181, both of the Civil Code, sold their property. When the “Receipt of Down Payment”is
plainly applies to the case at bench. considered in its entirety, it becomes more manifest that there was a
clear intent on the part of petitioners to transfer title to the buyer, but
Thus: since the transfer certificate of title was still in the name of
Art. 1475. The contract of sale is perfected at the moment there is a petitioners’ father, they could not fully effect such transfer although
meeting of minds upon the thing which is the object of the contract the buyer was then willing and able to immediately pay the purchase
and upon the price.From that moment, the parties may reciprocally price.
demand performance, subject to the provisions of the law governing
the form of contracts. - The parties did not merely enter into a contract to sell where the
sellers, after compliance by the buyer with certain terms and
conditions, promised to sell the property to the latter. What may be The CTA en banc reversed and set aside the CTA Second Division
perceived form the respective undertakings ofthe parties to the and absolvedPetron from any deficiency excise tax liability for
contract is that petitioners had already agreed to sell the house and taxable years 1995 to 1998.
lot they inherited from their father, completely willing to transfer full
ownership of the subject house and lot to the buyer if the documents The CIR moved for thereconsideration of the CTA En Banc Decision,
were then inorder. It just so happened, however, that the transfer but the motion was denied.
certificate of title was then still in the name of their father. It was more
expedient to first effect the change in the certificate of title so as to Issue:
bear their names. Did CTA commit reversible error in holding that Petron is not liable
for its excise tax liabilities from1995 to 1998?
That is why they undertook to cause the issuance of a new transfer
of the certificate of title in their names upon receipt of the down Ruling: No.
payment in the amount of P50,000. As soon as the new certificate of Petron is a transferee in good faith and for value of the subject TCCs
title is issued in their names, petitioners were committed to since the CIR had noallegation that there was a deviation from the
immediately execute the deed of absolute sale. Only then will the process for the approval of the TCCs, which Petron used aspayment
obligation of the buyer to pay the remainder of the purchase price to settle its excise tax liabilities for the years 1995 to 1998. The
arise. CIR’s claim that Petron haveparticipated in the fraudulent issuance
and transfer of the TCCs is negated by the Joint Stipulation it
CIR vs Petron Corporation, G.R. No. 185568, March 21, 2012 enteredinto with Petron in the proceedings before the CTA which
states that Petron did not participate in theprocurement and issuance
Facts: of the TCCs, which TCCs were transferred to Petron and later
utilized by Petronin payment of its excise taxes. This stipulation of
Respondent Petron is a corporation engaged in the production of fact by the CIR amounts to an admission and, having been made by
petroleum products and is aBoard of Investment (BOI) – registered the partiesin a stipulation of facts at pretrial, is treated as a judicial
enterprise in accordance with the provisions of the admission.
OmnibusInvestments Code of 1987 (E.O. 226) under Certificate of
Registration Nos. 89-1037 and D95-136. Duringthe period covering The joint stipulation made by the partiesconsequently obviated the
the taxable years 1995 to 1998, Petron had been an assignee of opportunity of the CIR to present evidence on this matter, as no proof
several Tax CreditCertificates (TCCs) from various BOI-registered is requiredfor an admission made by a party in the course of the
entities for which it utilized in the payment of its excise taxliabilities proceedings. Thus, the CIR cannot be allowed tochange its stand
for the taxable years 1995 to 1998. and renege on that admission.
The transfers and assignments of the said TCCs wereapproved by Further, the post-audit report on which the CIR based its allegations
the Department of Finance’s One Stop Shop Inter-Agency Tax Credit does not have the effect of asuspensive condition that would
and Duty DrawbackCenter (DOF Center) composed of determine the validity of the TCCs.
representatives from the appropriate government agencies.Taking As held in Petron v. CIR (G.R. No.180385, 28 July 2010, 626 SCRA
ground on a BOI letter issued on May 15, 1998 which states that 100), which is on all fours with the instant case, TCCs are valid
‘hydraulic oil, penetratingoil, diesel fuels and industrial gases are andeffective from their issuance and are not subject to a post-audit
classified as supplies and considered the suppliers thereof as a suspensive condition for their validity.
asqualified transferees of tax credit, Petron acknowledged and
accepted the transfers of the TCCs from thevarious BOI-registered The implication on the instant case of the said earlier ruling is that
entities. Such acceptance and use of the TCCs as payment of its Petron has the right to rely on the validityand effectivity of the TCCs
excise taxliabilities for the taxable years 1995 to 1998 had been that were assigned to it. The validity of those TCCs should not
continuously approved by the DOF as well as theBIR’s Collection depend on theresults of the DOF’s post-audit findings. Taxes are the
Program Division. nation’s lifeblood through which government agencies continue to
operate and withwhich the State discharges its functions for the
On January 30, 2002, Petitioner CIR issued an Assessment against welfare of its constituents. As an exception, however, thisgeneral
petitioner for deficiency excisetaxes for the taxable years 1995 to rule cannot be applied if it would work injustice against an innocent
1998 in the total amount of P 739,003,036.32, inclusive of party. Petron, in this case, wasnot proven to have had any
surchargesand interests on the ground that the TCCs utilized by participation in or knowledge of the CIR’s allegation of the fraudulent
petitioner in the payment of excise taxes have beencancelled by the transferand utilization of the subject TCCs. Respondent’s status as a
DOF for having been fraudulently issued and transferred. transferee in good faith and for value of theseTCCs has been
established and even stipulated upon by petitioner.
Thus, petitioner, through lettersdated August 31, 1999 and
September 1, 1999, was required by the DOF Center to submit Respondent was thereby providedample protection from the adverse
copies of itssales invoices and delivery receipts showing the findings subsequently made by the Center. Given the circumstances,
consummation of the sale transaction to certain TCCtransferors. theCIR’s invocation of the non-applicability of estoppel in this case is
misplaced
Instead of submitting the said documents, Petron filed a protest on
February 27, 2002. On March27, 2002, CIR served a Warrant of Central Philippine University vs CA
Distraint and/or Levy on petitioner to enforce payment of the BELLOSILLO
taxdeficiencies without first acting on its letter-protest. Construing
the Warrant of Distraint and/or Levy as thefinal adverse decision of FACTS
the BIR on its protest of the assessment, Petron filed the petition - in 1939, Don Ramon Lopez, Sr. who was a member of the Board of
before the CTASecond Division on April 2, 2002. Trustees of theCentral Philippine College (now Central Philippine
University) executed a deed of donation in favor of the latter of a
On May 4, 2007, the CTA Second Division promulgated a parcel of land with the following annotations:
Decisionordering Petron to pay the reduced amount of 1.the land described shall be utilized by the CPU exclusively for
P600,769,353.95 representing deficiency excise taxes for thetaxable theestablishment and use of a medical college with all its buildings
years 1995 to 1998 and 25% late payment surcharge and 20% as part of the curriculum
delinquency interest per annum onthe said amount, computed from
June 27, 2002 until the amount is fully paid. 2.the said college shall not sell, transfer or convey to any third party
nor in any way encumber said land
Petron filed a motion forreconsideration but was denied. Aggrieved,
Petron appealed the Decision to the CTA En Banc through a Petition 3.the said land shall be called RAMON LOPEZ CAMPUS and the
for Review. saidcollege shall be under obligation to erect a cornerstone bearing
that name.Any net income from the land or any of its parks shall be
put in a fund to beknown as the RAMON LOPEZ CAMPUS FUND to - pointed out an inconsistency in the majority opinion’s description of
be used for improvements of said campus and erection of a building the donationin question. In one part, it says that the donation in
thereon- on May 31, 1989, the heirs of Don Ramon Lopez, Sr. filed question is onerous. Yet in thelast paragraph it states that the
an action for annulment of donation, reconveyance and damages donation is basically a gratuitous one.- the discussion on conditional
against CPU alleging that: obligations is unnecessary as there is no conditionalobligation to
speak of in this case. The conditions imposed by the donor
1.since 1939 up to the time the action was filed the latter had determinesneither the existence nor the extinguishment of the
notcomplied with the conditions of the donation obligations of the donor and thedonee with respect to the donation.
In fact, the conditions imposed are the veryobligations of the
2.that CPU had in fact negotiated with the National Housing Authority donation.- the court should fix the duration for the performance of the
toexchange the donated property with another land owned by the conditions/obligationsin the donation. The mere fact that there is no
latter- CPU, in its answer alleged that: time fixed as to when the conditionsof the donation are to be fulfilled
does not ipso facto mean that the statute of limitations will not apply
1.the right of the private respondents to file the action had prescribed anymore and the action to revoke the donation
2.that it did not violate any of the conditions in the deed of becomesimprescriptible
donationbecause it never used the donated property for any other
purpose than thatfor which it was intended Quijada VS CA
3.that it did not sell, transfer, or convey it to any third party- the TC NATURE
held that petitioner failed to comply with the conditions of the Certiorari of CA’s decision
donation anddeclared it null and void. It further directed the petitioner FACTS
to execute a deed of reconveyance of the property in favor of the - April 5, 1956-Trinidad Quijada , together with her siblings, donated
heirs of the donor, namely, privaterespondents herein-- the CA ruled a two-hectareland to the Municipality of Talacogon, Agusan del Sur
that the annotations at the back of petitioner’s certificate of title with the condition that theparcel of land shall be used SOLELY and
wereresolutory conditions breach of which should terminate the EXCLUSIVELY as part of the campus of theproposed provincial high
rights of the donee thusmaking the donation revocable. It also found school of the said municipality.
that while the first conditionmandated petitioner to utilize the donated
property for the establishment of amedical school, the donor did not - Trinidad remained in possession of the land despite the donation.
fix a period within which the condition must befulfilled, hence, until a
period was fixed for the fulfillment of the condition, petitionercould - July 29, 1962- Trinidad sold one hectare of the said land to
not be considered as having failed to comply with its part of the Regalado Mondejar(respondent) without the benefit of a deed of sale
bargain,thus, it remanded the case to the court of origin for the and evidenced only by receipts of payment.- 1980- the heirs of
determination of the timewithin which the petitioner should comply Trinidad (who at this time was dead already) instituted acomplaint
with the first condition annotated in thecertificate of title which was dismissed for failure to prosecute.
ISSUES - 1987- the proposed provincial high school failed to materialize, the
1.WON the quoted annotations are onerous obligations and SangguniangBayan of the municipality enacted a resolution reverting
resolutory conditions the two-hectare land donated back to the donors.- In the meantime,
2. WON the right of the respondents to initiate an action has already Mondejar sold portions of the land to respondents,
prescribed FernandoBautista, Rodolfo Goloran, Efren Guden, and Ernesto
3. WON the Court may fix a period within which petitioner would Goloran.
establish a medicalcollege
- The heirs of Trinidad filed for this action (quieting of title, recovery
of possessionand ownership of parcels of land with claim for
HELD attorney’s fees and damages.)
1. Yes. Don Ramon Lopez, Sr. executed for a valuable consideration
which isconsidered the equivalent of the donation itself. Under Art. - According to the heirs, their mother Trinidad never sold, conveyed,
1181 of the Civil Code,on conditional obligations, the acquisition of transferred ordisposed of the property in question to any person or
rights, as well as the extinguishment orloss of those already entity much less to Mondejarsave the donation made to the
acquired, shall depend upon the happening of the even Municipality of Talacogon.
whichconstitutes the condition.
- Since the land still belonged to the municipality at the time of the
2. No. The condition imposed by the donor depended upon the alleged sale toMondejar, the supposed sale is null and void.
exclusive will of thedonee as to when this condition shall be fulfilled.
Since the time within which thecondition should be fulfilled depended - Mondejar claims that one hectare of the land was sold to him on
upon the exclusive will of the petitioner, ithas been held that its July 29, 1962, andthe remaining one-hectare on installment basis
absolute acceptance and the acknowledgment of itsobligation until fully paid. As a defense, heclaims that the action is barred by
provided in the deed of donation were sufficient to prevent the LACHES or has prescribed.
statute of limitations from barring the action of private respondents
upon the original contractwhich was the deed of donation. In this - TC- Trinidad had no legal right to sell the land to Mondejar since
case, the starting point from which theobligation to comply must be the ownershipbelongs to the municipality and the deed of sale
counted from the expiration of a reasonable periodand opportunity executed by Trinidad to Mondejardid not carry with it the conformity
for petitioner to fulfill what has been charged upon it by the donor. and acquiescence of her children since she wasa widow and 63 yrs
old at that time. So the respondents were asked to vacate theland
3. No. Art. 1197, where the courts may fix the duration for fulfillment, and restore the possession to the heirs.- CA- reversed the decision
cannot beapplied in this case. More than a reasonable period of 50 of the TC; sale to Mondejar was valid as Trinidadretained an
years has already beenallowed petitioner to avail of the opportunity inchoate interest on the lots by virtue of the automatic reversion
to comply with the condition even if itbe burdensome, to make the clausein the deed of donation.
donation in its favor forever valid, hence, there is nomore need to fix
the duration of a term of the obligation when such procedurewould ISSUE
be a mere technicality and formality and would serve no purpose WON the sale of the land to Mondejar was valid since the ownership
than todelay or lead to an unnecessary and expensive multiplication of the said landbelonged to the municipality at the time of the sale by
of suits. virtue of the conditionaldeed of donation executed by Trinidad and
her siblings and WON the action isbarred by laches
SEPARATEOPINION
HELD
DAVIDE dissent The decision of the CA is upheld; sale is valid. No atty’s fees
awarded; No moraldamages were likewise awarded.
- The consummation of the perfected contract is another matter. It
Reasoning occurs upon theactual or constructive delivery of the subject matter
On donation to the buyer when the seller orher successors-in-interest
- When the Municipality’s acceptance of the donation was made subsequently acquires ownership thereof.
known to thedonor, the Municipality became the new owner of the
donated property LAO LIM VS CA
- donationbeing a mode of acquiring and transmitting ownership- REGALADOOctober 31, 1990
notwithstanding thecondition imposed by the donee.
- The condition was that if the school never materializes or that it is NATURE
opened butdiscontinued or closed in the future, the property shall Petition to review the decision of the Court of Appeals
revert to the donor. FACTS
- The donation is perfected once the acceptance by the donee is - Dy entered into a contract of lease with Lim foe a period of 3 years
made known to thedonor. (1976-1979).After the stipulated term expired, Dy refused to vacate
- The resolutory condition is the construction of the school. It has the premises, hence Limfiled for an ejectment suit against Dy. The
been ruled thatwhen a person donates land to another on the case was terminated by a judiciallyapproved compromise
condition that the latter would buildupon the land a school, the agreement.
condition imposed is not a condition precedent or asuspensive
condition but a resolutory one. - The compromise agreement provides “that the term of lease shall
- At the time of the sales, Trinidad could not have sold the lots since be renewedevery three years retroacting from Oct 1979 – 1982; after
the ownershiphad been transferred by virtue of the deed of donation. which the rental shall beraised automatically by 20% every three
So long as the resolutorycondtion subsists and capable of fulfillment, years for as long as the defendant (DY)needed the premises and
the donation remains effective and thedonee continues to be the can meet and pay the said increases, the defendant togive notice of
owner subject only to the rights of the donor or hissuccessors-in- his intent to renew 60 days before the expiration of the term.”
interest under the deed of donation.
- April 17, 1985 – petitioner advised that he would no longer renew
- Since no period was imposed by the donor on when the must the the contractOctober 1985. On August 5, 1985, Dy informed the
donee mustcomply with the condition, the latter remains the owner petitioner in writing of hisintention to renew the contract of lease for
so long as he has tried tocomply with the condition within a another term. Lim advised that he didnot agree to a renewal.
reasonable period. In this case, the Municipalitymanifested in a
resolution that they cannot comply with the condition of building - January 15, 1986 – Lim filed another ejectment suit which was
aschool and the same was made known to the donor. This was when dismissed on the grounds that
the ownershipreverted back to Trinidad as provided in the reversion
clause of the deed of donation. (1) the lease contract has not expired being a continuous one
theperiod whereof depended on upon the lessee’s need for the
- The donor may have inchoate (meaning: imperfect) interest in the premises and his ability to pay rents and
donatedproperty during the time that ownership of the land has not
reverted to her. Suchinchoate interest may be the subject of (2) the compromise agreement constitutes res judicata.
contracts including a contract of sale. Herewhat the donor sold was
the land itself which she no longer owned. It would havebeen - On appeal, the respondent court affirmed the lower court’s
different if what she sold were her interests over the property under judgment in toto.
the deedof donation which is subject to the possibility of reversion of
ownership arising fromthe non-fulfillment of the resolutory condition.
ISSUES
On laches 1. WON the lease contract only depends on the party’s need for the
- The petitioners’ action in NOT YET barred by laches. It cannot be premises andhis ability to pay the rents
said that thepetitioners had slept on their rights for along time since
they initiated the action ayear after upon knowledge of the reversion 2. WON the compromise agreement constitute res judicata
of the property to the donor.
HELD
- Laches presupposes failure or neglect for an unreasonable and 1.Ratio
unexplained lengthof time, to do that which, by exercising due The lease contract cannot be made to depend solely on the free
diligence, could have or should havebeen done earlier; it is anduncontrolled choice of the lessee.
negligence or omission to assert a right within a reasonabletime,
thus, giving rise to a presumption that the party entitled to assert it Reasoning
either hasabandoned or declined to assert it. - The stipulation “for as long as the defendant needed the premises
and can meetand pay the said increases” is purely potestative. The
- Essential elements: continuance, effectivity andfulfillment of a contract of lease cannot be
a. Conduct on the part of the defendant, or of one under whom he made to depend exclusively upon thefree and uncontrolled choice of
claims, givingrise to the situation complained of; the lessee between continuing payment of therentals or not,
b. delay in asserting complainant’s right after he had knowledge of depriving the owner of any say in the matter.
the defendant’sconduct and after he has an opportunity to sue;
c. Lack of knowledge or notice on the part of the defendant that the - Where the instrument is susceptible of two interpretations, the one
complainantwould assert the right on which he bases his suit; which willmake it valid and legal should be adopted.
d. injury or prejudice to the defendant in the event relief is accorded
to thecomplaint.- these elements are not present in this case 2.
Ratio
On sale- The second action for ejectment does not constitute res judicata.
Sale being a consensual contract is perfected by mere consent Reasoning
which ismanifested the moment there is a meeting of the minds as to - For a judgment be a bar to a subsequent case, it must be
the offer andacceptance thereof on 3 elements: subject matter, price (1) a final judgment,
and terms of payment of the price. (2)rendered by a court with jurisdiction over the subject matter of the
parties,
- Ownership by the seller on the thing sold at the time of the (3) itmust be judgment on the merits, and
perfection of thecontract of sale is not an element for its perfection. (4) there must be identity between the twocases as to parties,
Perfection per se does nottransfer ownership which occurs upon the subject matter and cause of action.- The fourth is lacking in the case
actual or constructive delivery of thething sold. at bar. There is no identity of subject matter andcause of action.
Disposition
RUSTAN PULP AND PAPER MILLS VS Intermediate Appellate
Wherefore, the decision of respondent Court of Appeals is Court
reversedand set aside. Private respondent is hereby ordered to
immediately vacate andreturn the possession of the leased premises NATURE
subject of the present action to thepetitioner and to pay the monthly Petition for review of the decision of the then Intermediate Appellate
rentals due thereon in accordance with thecompromise agreement Court.
until he has actually vacated the same FACTS
- Rustan established a pulp and paper mill in Lanao del Norte in
M.D. TAYLOR VS. UY TIENG PIAO AND TAN LIUAN& COMPANY 1966.
- The machinery did not arrive in Manila within the 6 months; the “(Par 7)
reason does notappear, but a preponderance of evidence show that That the BUYER shall have the right to stop delivery of the saidraw
the defendants seeing that oilbusiness no longer promised large materials by the seller covered by this contract when supply of the
returns, either cancelled the order for machineryfrom choice or were same shallbecome sufficient until such time when need for said raw
unable to supply the capital necessary to finance the project. materials shall havebecome necessary provided, however, that the
SELLER is given sufficient notice."
- Defendants communicated to Taylor that they had decided to
rescind the contract. - During the test run of the pulp mill, the machinery line had major
defects whiledeliveries of the raw materials piled up, which prompted
- Taylor instituted this action to recover damages in the amount of the Japanese supplier of the machinery to recommend the stoppage
P13k, coveringsalary and perks due and to become due of the deliveries.
ISSUE - The suppliers were informed to stop deliveries and Rustan sent a
WON in a contract for the prestation of service, it is lawful for the letter (datedSept 1968) to Lluch informing him that “the supply of raw
parties to insert aprovision giving the employer the power to cancel materials to us hasbecome sufficient and we will not be needing
the contract in contingencywhich may be dominated by himself further delivery from you. As per theterms of our contract, please
stop delivery 30 days from today.” It was signed byDr. Romeo
HELD: YES Vergara, the resident manager.
One of the consequences of the stipulation was that the employers
were left in aposition where they could dominate the contingency, - Lluch sought to clarify whether stoppage of delivery or termination
and the result was about thesame as if they had been given an of the contractof sale was intended, but the query was not answered
unqualified option to dispense with the servicesof Taylor at the end of by petitioners. This allegedambiguity notwithstanding, Lluch and the
6 months. But this circumstance does not make thestipulation illegal. other suppliers resumed deliveries afterthe series of talks between
Vergara and Lluch.
- A condition at once facultative and resolutory may be valid even
though thecondition is made to depend upon the will of the obligor. - On January 23, 1969, a complaint for contractual breach was filed.
The trial courtdismissed it. On appeal, the IAC modified the judgment
- If it were apparent, or could be demonstrated that the defendants by directing Rustan, Tantoco and Vergara to pay respondents, jointly
were underpositive obligation to cause the machinery to arrive in and severally, the sum of P30,000.00 as moral damages and
Manila, they would of coursebe liable, in the absence of affirmative P15,000.00 as attorney's fees
proof showing that the non-arrival of themachinery was due to some
cause not having its origin in their own act or will. ISSUES
1. WON the contractual provisions mentioned above as regards the
- The contract, however, expresses no such positive obligation, and stoppage of delivery when there issufficient supply of raw materials
its existencecannot be implied in the face of the stipulation, defining are valid
the conditions under whichthe defendants can cancel the contract. 2. WON Tantoco and Vergara should be personally liable
Thetwo exceptions contemplated by Article 1897 of the New Civil -A few months later, or on 21 February 1989, judgment was rendered
Code where agentsare directly responsible are absent and wanting. ordering thedefendants to vacate the premises. The decision was
handed down beyond the 60-day period (expiring 09 August 1988)
Disposition stipulated in the contract. The writ of execution of the judgment was
The decision appealed from is MODIFIED in the sense that issued, still later, on 30 March 1989.
onlypetitioner Rustan Pulp and Paper Mills is ordered to pay moral
damages andattorney's fees as awarded by respondent Court. -In a letter, dated 07 April 1989, private respondent sought to return
the P50,000.00she received from petitioner since, she said, she
ROMERO VS CA could not "get rid of the squatters"on the lot. Atty. Sergio A. F.
VITUG November 23, 1995 Apostol, counsel for petitioner, in his reply of 17 April1989, refused
the tender and stated:
FACTS
-Petitioner Virgilio R. Romero, his foreign partners decided to put up “Our client believes that with the exercise of reasonable diligence
a centralwarehouse in Metro Manila on a land area of approximately considering thefavorable decision rendered by the Court and the writ
2,000 square meters. of execution issued pursuant thereto, it is now possible to eject the
squatters from the premises of the subject property, for which
-The project was made known to several freelance real estate reason, he proposes that he shall take it upon himself to eject the
brokers. squatters, provided, that expenses which shall be incurred by reason
thereof shall be chargeable to the purchase price of the land
-A day or so after the announcement, Alfonso Flores and his wife .
offered a parcel of land measuring 1,952 square meters located in ISSUE
Barangay San Dionisio, Parañaque,Metro Manila, the lot was in the WON the vendor may demand the rescission of a contract for the
name of private respondent Enriqueta Chua vda. DeOngsiong. sale of a parcel of land for a cause traceable to his own failure to
have the squatters on the subjectproperty evicted within the
-Petitioner visited the property and, except for the presence of contractually stipulated period
squatters in thearea, he found the place suitable for a central
warehouse. HELD
NO. Private respondent's failure "to remove the squatters from the
-Flores spouses called on petitioner with a proposal that should he property" withinthe stipulated period gives petitioner the right to
advance theamount of P50,000.00 which could be used in taking up either refuse to proceed with theagreement or waive that condition in
an ejectment case against the squatters, private respondent would consonance with Article 1545 of the CivilCode."
agree to sell the property for only P800.00 per square meter.
This option clearly belongs to petitioner and not to private
–-Petitioner expressed his concurrence. On 09 June 1988, a contract respondent.
denominated"Deed of Conditional Sale," was executed between
petitioner and privaterespondent. -The undertaking required of private respondent does not constitute
a "potestativecondition dependent solely on his will" that might,
with the following terms and conditions: otherwise, be void in accordancewith Article 1182 of the Civil
Codebut a "mixed" condition "dependent not on thewill of the vendor
"1. That the sum of FIFTY THOUSAND PESOS (P50,000.00) ONLY alone but also of third persons like the squatters and
Philippine Currency,is to be paid upon signing and execution of this governmentagencies and personnel concerned." Where the so-
instrument. called "potestative condition" isimposed not on the birth of the
obligation but on its fulfillment, only the condition isavoided, leaving
"2. The balance of the purchase price in the amount of unaffected the obligation itself.
(P1,511,600.00) ONLY shall be paid 45days after the removal of all
squatters from the above described property." -In contracts of sale particularly, Article 1545 of the Civil Code,
aforementioned,allows the obligee to choose between proceeding
3. Upon full payment of the overall purchase price as aforesaid, with the agreement or waivingthe performance of the condition.
VENDOR withoutnecessity of demand shall immediately sign, Petitioner has waived the performance of thecondition imposed on
execute, acknowledged (sic) anddeliver the corresponding deed of private respondent to free the property from squatters.
be valid, must be consented to by Interphil. When acontract is
-Private respondent's action for rescission is not warranted. She is unlawfully novated, the aggrieved creditor may not deal with
not the injuredparty. The right of resolution of a party to an obligation thesubstitute.
under Article 1191 of theCivil Code is predicated on a breach of faith
by the other party that violates thereciprocity between them. It is 2. The appellees could have opted to rescind or refuse to recognize
private respondent who has failed in her obligationunder the the newmanager, but all they wanted was to postpone the fight owing
contract. Petitioner did not breach the agreement. He has agreed, in to an injury Elordesustained. The desire to postpone the fight is
fact, to shoulder the expenses of the execution of the judgment in the lawful and reasonable. The GAB did not act arbitrarily in acceding to
ejectment caseand to make arrangements with the sheriff to effect the request to reset the date of thefight and Yulo himself agreed to
such execution. abide by the GAB ruling. The appellees offered to move the fight w/in
the 30 day period for postponementbut this was refused by the
In his letter of 23 June 1989, counsel for petitioner has tendered appellants, notwithstanding the fact that by virtue of the appellants’
payment and demanded forthwiththe execution of the deed of violations, they have forfeited any right to the enforcement of
absolute sale. Parenthetically, this offer to pay, havingbeen made thecontract.
prior to the demand for rescission, assuming for the sake of
argumentthat such a demand is proper under Article 159223 of the 3. The issue of denial of postponement of trial was raised in another
Civil Code, would likewisesuffice to defeat private respondent's petition forcertiorari and prohibition. It can’t be resurrected in this
prerogative to rescind thereunder. case.
BOYSAW VS. INTERPHIL PROMOTIONS 4. The court was correct in denying new trial. The alleged newly
Fernan March 20,1987 discoveredevidence are merely clearances from clerk of court, which
can’t alter the result of thetrial.
NATURE
Appeal from the decision of the court of first instance of Rizal, Br. V. 5. Because the appellants willfully refused to participate in the final
hearing andrefused to present documentary evidence, they
FACTS prevented themselves from objectingto or presenting proof contrary
- On May 1, 1961, Boysaw and manager Ketchum signed with to those adduced by the appellees.
Interphil(represented by Sarreal) a contract to engage Flash Elorde
in a boxing match atRizal Memorial Stadium on Sept 30, 1961 or not DEIPARINE JR V CA , .
later than 30 days should apostponement be mutually agreed upon. CRUZ April ; 23, 1993
Boysaw, accdg to contract, should notengage in other bouts prior to NATURE
the contest. Petition for review of decision of CA
FACTS
- Interphil signed Elorde to a similar agreement. - Spouses Carungay entered into an agreement withDeiparine for the
construction of a 3-storey dormitory. The Carungays agreed to pay
- Boysaw fought and defeated Louis Avila in Nevada. Php970K, and Deiparinebound himself to erect the building in strict
accordance to the plans and specifications. In the General
- Ketchum assigned to Amado Araneta his managerial rights, who Conditions and Specifications document, the minimum acceptable
later transferredthe rights to Alfredo Yulo. compressive strength of the building was set at 3,000 psi (pounds
per square inch).
- Sarreal wrote to Games and Amusement Board (GAB) regarding
this switch of managersbec they weren’t notified. However, the Carungays found out that Deiparine was deviating
fromthe plans and specifications, thus impairing the strength and
- GAB called for conferences and decided to schedule the Elorde- safety of the building.
Boysaw bout onNov 4, 1961. USA National Boxing Assoc approved.
The spouses even issued a memorandum complaining that the
- Sarreal offered to move the fight to Oct 28 for it to be w/in the 30 construction workswere faulty and done haphazardly mainly due to
day allowablepostponement in the contract. Yulo refused. He was lax supervision coupled withinexperienced and unqualified staff. The
willing to approve the fight onNov 4 provided it will be promoted by a memorandum was ignored.
certain MamertoBesa. After several conferences, the parties agreed to conduct cylinder
tests to ascertaincompliance with safety standards. Carungay
- The fight contemplated in the May 1 contract never materialized. suggested core testing (a more reliabletest of safety and strength),
Boysaw and Yulo sued Interphil, Sarreal and Nieto. and although Deiparine was relunctant at first, he
agreed to it and even promised that should the structure fail the test,
- Boysaw was abroad when he was scheduled to take the witness he wouldshoulder the test expenses. The core test was conducted,
stand. Lowercourt reset the trial. Boysaw was still absent on the later and the building wasfound to be structurally defective.
date. Court reset. On thethird instance, a motion for postponement
was denied. - The spouses then filed in the RTC for rescission of the construction
contract andfor damages. Deiparine alleged that RTC did not have
- Boysaw and Yulo moved for a new trial, but it was denied. Hence, jurisdiction for constructioncontracts are now cognizable by the
this appeal. Philippine Construction Development Board.
RTC declared the contract rescinded, Deiparine to have forfeited his
ISSUES expenses in theconstruction, and ordered Deiparine to reimburse the
1. WON there was a violation of the May 1 contract and if so, who spouses for the core testingand restore the premises to their former
was guilty condition before the construction began.
2. WON there was legal ground for postponement of the fight
3. WON lower court erred in refusing postponement of the trial for CA affirmed RTC.
3rdtime ISSUES
4. WON lower court erred in denying new trial 1. WON RTC had jurisdiction over the case
5. WON lower court erred in awarding appellees damages 2. WON rescission is the proper remedy
HELD HELD
1. Boysaw violated the contract when he fought with Avila. Civil Code 1. Yes. Firstly, there is no Philippine Construction Development
provides, thepower to rescind obligations is implied, in reciprocal Board in existence.
ones, (as in this case) in caseone of the obligors should not comply There is however, a Philippine Domestic Construction Board
w/ what is incumbent upon him.Another violation was made in the (PDCB), but this body has jurisdiction to settle claims and disputes in
transfers of managerial rights. These were infact novations which, to the implementation of PUBLICconstruction contracts (only), and thus
does not have jurisdiction over privateconstruction contracts. 8. The DBP received a copy of the decision on January 13, 1993 and,
(Deiparine’s counsel is even held in contempt of court forchanging therefore, it had until January 28, 1993 within which to file a motion for its
the wording of the relevant provision in the law, making it appear that reconsideration or a notice of appeal from it. But the DBP failed to appeal
thePDCB had jurisdiction over the instant case.) supposedly because of excusable negligence and the withdrawal of its previous
counsel of record.
2. Yes. 9. On June 10, 1998 the Quirong heirs filed the present action10 against
- The facts show that Deiparine deliberately deviated from the the DBP before the RTC for rescission of the contract of sale between Sofia
specifications of the Carungays (changing the minimum strength, Quirong, their predecessor, and the DBP and praying for the reimbursement of the
concrete mixture, etc.), possibly toavoid additional expenses so as to price of P78,000.00 that she paid the bank plus damages. The heirs alleged that
avoid reduction in profits. His breach of duty constituted a substantial they were entitled to the rescission of the sale because the decision stripped them
violation of the contract, which is correctible by judicial rescission. of nearly the whole of the lot that Sofia Quirong, their predecessor, bought from the
Particularly for reciprocal obligations, Art.1191 CC provides that: DBP. The DBP filed a motion to dismiss the action on ground of prescription and res
“The power torewind obligations is implied in reciprocal ones, in case judicata but the RTC denied their motion.
one of the obligors shouldnot comply with what is incumbent upon 10. On June 14, 2004, after hearing the case, the RTC rendered a
him. decision,11 rescinding the sale between Sofia Quirong and the DBP and ordering
the latter to return to the Quirong heirs the P78,000.00 Sofia Quirong paid the
- The injured party may choose between the fulfillment and the bank.12
rescission of theobligation, with the payment of damages in either 11. On appeal by the DBP, the Court of Appeals (CA) reversed the RTC
case. He may also seekrescission, even after he has chosen decision and dismissed the heirs’ action on the ground of prescription.
fulfillment, if the latter should becomeimpossible. ISSUES
The issues presented in this case are:
The court shall decree the rescission claimed, unless there be just 1. Whether or not the Quirong heirs’ action for rescission of respondent DBP’s sale
cause authorizingthe fixing of a period.” of the subject property to Sofia Quirong was already barred by prescription; and
2. In the negative, whether or not the heirs of Quirong were entitled to the rescission
- Clearly, the construction contract falls squarely under the coverage of the DBP’s sale of the subject lot to the late Sofia Quirong as a consequence of
of Art.1191because it imposes upon Deiparine the obligation to build her heirs having been evicted from it.
the structure and uponthe Carungays the obligation to pay for the COURT’S RULING: (CA)
project upon its completion. 1. A. The CA held that the Quirong heirs’ action for rescission of
the sale between DBP and their predecessor, Sofia Quirong, is barred by
- Art.1191 is not predicated on economic prejudice to one of the prescription reckoned from the date of finality of the December 16, 1992 RTC
parties but onbreach of faith by one of them that violates the decision in Civil Case D-7159 and applying the prescriptive period of four
reciprocity between them. Theviolation of reciprocity between the years set by Article 1389 of the Civil Code.
parties, to wit, the breach caused by Deiparine'sfailure to follow the 2. The next question that needs to be resolved is the applicable period of
stipulated plans and specifications, has given the Carungayspouses prescription:
the right to rescind or cancel the contract. 3. Their complaint asked for the rescission of the contract of sale between
Sofia Quirong, their predecessor, and the DBP and the reimbursement of the price
Disposition Decision affirmed. of P78,000.00 that Sofia Quirong paid the bank plus damages. The prescriptive
period for rescission is four years.
4. The status of that contract at the time of the filing of the action for
HEIRS OF SOFIA QUIRONG, vs. DEVELOPMENT BANK OF THE PHILIPPINES
rescission? Apparently, that contract of sale had already been fully performed when
Sofia Quirong paid the full price for the lot and when, in exchange, the DBP
General Description:
executed the deed of absolute sale in her favor. There was a turnover of control of
This case is about the prescriptive period of an action for rescission of a contract of
the property from DBP to Sofia Quirong since she assumed under their contract,
sale where the buyer is evicted from the thing sold by a subsequent judicial order in
"the ejectment of squatters and/or occupants" on the lot, at her own expense.19
favor of a third party.
5. 3. And that action for rescission, which is based on a subsequent
economic loss suffered by the buyer, was precisely the action that the Quirong heirs
FACTS:
took against the DBP. Consequently, it prescribed as Article 1389 provides in four
1. When the late Emilio Dalope died, he left a 589-square meter untitled
years from the time the action accrued. Since it accrued on January 28, 1993 when
lot1 in Sta. Barbara, Pangasinan, to his wife, Felisa Dalope (Felisa) and their nine
the decision became final and executory and ousted the heirs from a substantial
children, one of whom was Rosa Dalope-Funcion.2 To enable Rosa and her
portion of the lot, the latter had only until January 28, 1997 within which to file their
husband Antonio Funcion (the Funcions) get a loan from respondent Development
action for rescission. Given that they filed their action on June 10, 1998, they did
Bank of the Philippines (DBP), Felisa sold the whole lot to the Funcions.
so beyond the four-year period.
2. On February 12, 1979, after the Funcions failed to pay their loan, the
6. With the conclusion that the Court has reached respecting the first
DBP foreclosed the mortgage on the lot and consolidated ownership in its name on
issue presented in this case, it would serve no useful purpose for it to further
June 17, 1981.
consider the issue of whether or not the heirs of Quirong would have been entitled
3. Four years later or on September 20, 1983 the DBP conditionally sold
to the rescission of the DBP’s sale of the subject lot to Sofia Quirong as a
the lot to Sofia Quirong4 for the price of P78,000.00. In their contract of sale, Sofia
consequence of her heirs having been evicted from it. As the Court has ruled above,
Quirong waived any warranty against eviction. The contract provided that the DBP
their action was barred by prescription.
did not guarantee possession of the property and that it would not be liable for any
WHEREFORE, the Court DENIES the petition.
lien or encumbrance on the same.
4. Two months after that sale or on November 28, 1983 Felisa and her
EDS MANUFACTURING INC v HEALTHCHECK INT’L INC
eight children (collectively, the Dalopes)5 filed an action for partition and declaration
FACTS:
of nullity of documents with damages against the DBP and the Funcions.
5. On December 27, 1984, notwithstanding the suit, the DBP executed a
deed of absolute sale of the subject lot in Sofia Quirong’s favor. Healthcheck Inc. a 1-lcalth Maintenance Organization HMO) entered into a
6. On May 11, 1985, Sofia Quirong having since died, her heirs (petitioner one-year contract with DLSUMC in which HCI was to provide the employees
Quirong heirs) filed an answer in intervention in which they asked the RTC to award
of EMI and their dependents as host of medical services and benefits
the lot to them and, should it instead be given to the Dalopes, to allow the Quirong
heirs to recover the lot’s value from the DBP. But, because the heirs failed to file a
formal offer of evidence, the trial court did not rule on the merits of their claim to the Only two months into the program, problems began. HCI notified EMI that its
lot and, alternatively, to relief from the DBP.7
accreditation with DLSUMC was suspended and advised it to avail of the
7. G. On December 16, 1992 the RTC rendered a decision, declaring
the DBP’s sale to Sofia Quirong valid only with respect to the shares of Felisa services of nearby accredited institutions.
and Rosa Funcion in the property. It declared Felisa’s sale to the Funcions,
the latter’s mortgage to the DBP, and the latter’s sale to Sofia Quirong void Although HCI had yet to settle its accounts with it, DLSUMC resumed
insofar as they prejudiced the shares of the eight other children of Emilio and
services. Despite this commitment, HCI failed to preserve its credit standing
Felisa who were each entitled to a tenth share in the subject lot.
with DLSUMC prompting the latter to suspend its accreditation for a second The injured party may choose between the fulfillment and the rescission of the
time. A third suspension was still to follow on and remained in force until the obligation, with the payment of damages in either case. He may also seek
end of the contract period. rescission, even after he has chosen fulfillment, if the latter should become
impossible.
Complaints from EMI employees and workers were pouring in that their HMO
cards were not being honored by the DLSUMC and other hospitals and The court shall decree the rescission claimed, unless there be just cause
physicians. EMI formally notified HCI that it was rescinding their April 1998 authorizing the fixing of a period.
Agreement on account of HCI’s serious and repeated breach of its
undertaking including but not limited to the unjustified non-availability of This is understood to be without prejudice to the rights of third persons who have
services. It demanded a return of premium for the unused period in the cost acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage
of P6 million. Law.
What went in the way of the rescission of the contract, was the failure of EMI The general rule is that rescission (more appropriately, resolution ) of a
to collect all the HMO cards of the employees and surrender them to HCI as contract will not be permitted for a slight or casual breach, but only for such
stipulated in the Agreement. HCI had to tell EMI on that its employees were substantial and fundamental violations as would defeat the very object of the
still utilizing the cards even beyond the pretermination date set by EMI. It parties in making the agreement.
asked for the surrender of the cards so that it could process the
pretermination of the contract and finalize the reconciliation of accounts.
Thus, the rescission referred to in Article 1191, more appropriately referred to as
resolution, is on the breach of faith by one of the parties which is violative of the
Without responding to this reminder, EMI sent HCI two letters demanding for reciprocity between them.
the payment ofP5,884,205 as the 2/3 portion of the premium that remained
unutilized after the Agreement was rescinded in the previous September. In the present case, it is apparent that HCI violated its contract with EMI to provide
medical service to its employees in a substantial way. As aptly found by the CA, the
HCI pre-empted EMI’s threat of legal action by instituting the present case various reports made by the EMI employees from July to August 1998 are living
before the Regional Trial Court of Pasig. The cause of action it presented was testaments to the gross denial of services to them at a time when the delivery was
the unlawful pretermination of the contract and failure of EMI to submit to a crucial to their health and lives.
joint reconciliation of accounts and deliver such assets as properly belonged
to HCI. However, although a ground exists to validly rescind the contract between the
parties, it appears that EMI failed to judicially rescind the same. In Iringan v. Court of
EMI responded with an answer alleging that HCI reneged on its duty to Appeals, this Court reiterated the rule that in the absence of a stipulation, a party
provide adequate medical coverage after EMI paid the premium in full. Having cannot unilaterally and extrajudicially rescind a contract. A judicial or notarial act is
rescinded the contract, it claimed that it was entitled to the unutilized portion necessary before a valid rescission (or resolution) can take place. Thus –
of the premium, and that the accounting required by HCI could not be
undertaken until it submitted the monthly utilization reports mentioned in the Clearly, a judicial or notarial act is necessary before a valid rescission can take
Agreement. place, whether or not automatic rescission has been stipulated. It is to be noted that
the law uses the phrase "even though" emphasizing that when no stipulation is
RTC: The court ruled in favor of HCI. It found that EMI’s rescission of the found on automatic rescission, the judicial or notarial requirement still applies.
Agreement was not done through court action or by a notarial act and was
based on casual or slight breaches of the contract. Moreover, despite the xxxx
announced rescission, the employees of EMI continued to avail of HCI’s
services. But in our view, even if Article 1191 were applicable, petitioner would still not be
entitled to automatic rescission. In Escueta v. Pando, we ruled that under Article
CA: Reversed the decision of the RTC and ruled that although Healthcheck 1124 (now Article 1191) of the Civil Code, the right to resolve reciprocal obligations,
International, (HCI) substantially breached their agreement, it also appears is deemed implied in case one of the obligors shall fail to comply with what is
that Eds Manufacturing, Inc. (EMI) did not validly rescind the contract incumbent upon him. But that right must be invoked judicially. The same article also
between them. Thus, the CA dismissed the complaint filed by HCI, while at provides: "The Court shall decree the resolution demanded, unless there should be
the same time dismissing the counterclaim filed by EMI. grounds which justify the allowance of a term for the performance of the obligation."
EMI filed a Motion for Partial Reconsideration against said decision. However, This requirement has been retained in the third paragraph of Article 1191, which
the same was denied in a Resolution dated March 16, 2004. states that "the court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period."
ISSUE: W/O/N There was a valid rescission of the agreement of the parties
Consequently, even if the right to rescind is made available to the injured party, the
obligation is not ipso facto erased by the failure of the other party to comply with
RULING: what is incumbent upon him.
We rule in the negative. The party entitled to rescind should apply to the court for a decree of rescission. The
right cannot be exercised solely on a party’s own judgment that the other committed
First, Article 1191 of the Civil Code states: a breach of the obligation. The operative act which produces the resolution of the
contract is the decree of the court and not the mere act of the vendor. Since a
The power to rescind obligations is implied in reciprocal ones, in case one of judicial or notarial act is required by law for a valid rescission to take place, the letter
the obligors should not comply with what is incumbent upon him. written by respondent declaring his intention to rescind did not operate to validly
rescind the contract.
What is more, it is evident that EMI had not rescinded the contract at all. As
observed by the CA, despite EMI s pronouncement, it failed to surrender the HMO The plaintiffs-appellees filed a case before the Court of First Instance to compel the
cards of its employees although this was required by the Agreement, and allowed defendant to execute in their favor the final deed of sale alleging inter alia that after
computing all subsequent payments for the land in question, they found out that
them to continue using them beyond the date of the rescission. The in-patient and
they have already paid the total amount including interests, realty taxes and
the out-patient utilization reports submitted by 1 ICI shows entries as late as March incidental expenses. The defendants alleged in their answer that the plaintiffs
1999, signifying that EMI employees 1 were availing of the services until the violated par. 6 of the contract to sell when they failed and refused to pay and/or offer
contract period were almost over. The continued use by them of their privileges to pay monthly installments corresponding to the month of August, 1966 for more
under the contract, with the apparent consent of EMI, belies any intention to cancel than 5 months, thereby constraining the defendants to cancel the said contract.
or rescind it, even as they felt that they ought to have received more than what they
got. The Court of First Instance rendered judgment in favor of the plaintiffs, hence this
appeal.
ISSUE:
UNIVERSITY OF THE PHILIPPINES VS. DE LOS ANGELES Has the Contract to Sell been automatically and validly cancelled by the defendants-
appellants?
FACTS:
On November 2, 1960, UP and ALUMCO entered into a logging agreement whereby RULING:
the latter was granted exclusive authority to cut, collect and remove timber from the No. While it is true that par.2 of the contract obligated the plaintiffs-appellees to pay
Land Grant for a period starting from the date of agreement to December 31, 1965, the defendants the sum of P3,920 plus 7% interest per annum, it is likewise true that
extendible for a period of 5 years by mutual agreement. under par 12 the seller is obligated to transfer the title to the buyer upon payment of
the said price.
On December 8, 1964, ALUMCO incurred an unpaid account of P219,362.94.
Despite repeated demands, ALUMCO still failed to pay, so UP sent a notice to The contract to sell, being a contract of adhesion, must be construed against the
rescind the logging agreement. On the other hand, ALUMCO executed an party causing it. The Supreme Court agree with the observation of the plaintiffs-
instrument entitled “Acknowledgment of Debt and Proposed Manner of Payments. It appellees to the effect that the terms of a contract must be interpreted against the
was approved by the president of UP, which stipulated the following: party who drafted the same, especially where such interpretation will help effect
justice to buyers who, after having invested a big amount of money, are now sought
3. In the event that the payments called for are not sufficient to liquidate the to be deprived of the same thru the prayed application of a contract clever in its
foregoing indebtedness, the balance outstanding after the said payments have been phraseology, condemnable in its lopsidedness and injurious in its effect which, in
applied shall be paid by the debtor in full no later than June 30, 1965. essence, and its entirety is most unfair to the buyers.
5. In the event that the debtor fails to comply with any of its promises, the Debtor
agrees without reservation that Creditor shall have the right to consider the Logging Thus, since the principal obligation under the contract is only P3,920.00 and the
Agreement rescinded, without the necessity of any judicial suit…ALUMCO plaintiffs-appellees have already paid an aggregate amount of P4,533.38, the courts
continued its logging operations, but again incurred an unpaid account. should only order the payment of the few remaining installments but not uphold the
cancellation of the contract. Upon payment of the balance of P671.67 without any
On July 19, 1965, UP informed ALUMCO that it had, as of that date, considered interest thereon, the defendant must immediately execute the final deed of sale in
rescinded and of no further legal effect the logging agreement, and that UP had favor of the plaintiffs and execute the necessary transfer of documents, as provided
already taken steps to have another concessionaire take over the logging operation. in par.12 of the contract.
ALUMCO filed a petition to enjoin UP from conducting the bidding. The lower court
ruled in favor of ALUMCO, hence, this appeal. Velarde vs. Court of Appeals
Facts: David Raymundo (private respondent) is the absolute and registered owner
ISSUE: of a parcel of land, located at 1918 Kamias St., Dasmariñas Village Makati, together
Can petitioner UP treat its contract with ALUMCO rescinded, and may disregard the with the house and other improvements, which was under lease. It was negotiated
same before any judicial pronouncement to that effect? by David’s father with plaintiffs Avelina and Mariano Velarde (petitioners). A Deed of
Sale with Assumption of Mortgage was executed in favor of the plaintiffs. Part of the
RULING: consideration of the sale was the vendee’s assumption to pay the mortgage
Yes. In the first place, UP and ALUMCO had expressly stipulated that upon default obligations of the property sold in the amount of P 1,800,000.00 in favor of the Bank
by the debtor, UP has the right and the power to consider the Logging Agreement of of the Philippine Islands. And while their application for the assumption of the
December 2, 1960 as rescinded without the necessity of any judicial suit. As to such mortgage obligations is not yet approved by the mortgagee bank, they have agreed
special stipulation and in connection with Article 1191 of the Civil Code, the to pay the mortgage obligations on the property with the bank in the name of Mr.
Supreme Court, stated in Froilan vs. Pan Oriental Shipping David Raymundo. It was further stated that “in the event Velardes violate any of the
Co: “There is nothing in the law that prohibits the parties from entering into terms and conditions of the said Deed of Real Estate Mortgage, they agree that the
agreement that violation of the terms of the contract would cause cancellation downpayment P800,000.00, plus all the payments made with the BPI on the
thereof, even without court intervention. In other words, it is not always necessary mortgage loan, shall be forfeited in Favor of Mr. Raymundo, as and by way of
for the injured party to resort to court for rescission of the contract.” liquidated damages, w/out necessity of notice or any judicial declaration to that
effect, and Mr. Raymundo shall resume total and complete ownership and
ANGELES VS. CALASANZ possession of the property, and the same shall be deemed automatically cancelled”,
135 SCRA 323 signed by the Velardes.
FACTS: Pursuant to said agreements, plaintiffs paid BPI the monthly interest loan for three
On December 19, 1957, defendants-appellants Ursula Torres Calasanz and months but stopped in paying the mortgage when informed that their application for
plaintiffs-appellees Buenaventura Angeles and Teofila Juani entered into a contract the assumption of mortgage was not approved. The defendants through a counsel,
to sell a piece of land located in Cainta, Rizal for the amount of P3,920.00 plus 7% wrote plaintiffs informing the latter that their non-payment to the mortgagee bank
interest per annum. constituted non-performance of their obligation and the cancellation and rescission
of the intended sale. And after two days, the plaintiffs responded and advised the
The plaintiffs-appellees made a down payment of P392.00 upon the execution of the vendor that he is willing to pay provided that Mr. Raymundo: (1) delivers actual
contract. They promised to pay the balance in monthly installments of P41.20 until possession of the property to them not later than January 15, 1987 for their
fully paid, the installment being due and payable on the 19th day of each month. occupancy (2) causes the release of title and mortgage from the BPI and make the
The plaintiffs-appellees paid the monthly installments until July 1966, when their title available and free from any liens and encumbrances (3) executes an absolute
aggregate payment already amounted to P4,533.38. deed of sale in their favor free from any liens and encumbrances not later than Jan.
21, 1987.
On December 7, 1966, the defendants-appellants wrote the plantiffs-appellees a
letter requesting the remittance of past due accounts. On January 28, 1967, the The RTC of Makati dismissed the complaint of the petitioners against Mr. Raymundo
defendants-appellants cancelled the said contract because the plaintiffs failed to for specific performance, nullity of cancellation, writ of possession and damages.
meet subsequent payments. The plaintiffs’ letter with their plea for reconsideration of However, their Motion for Reconsideration was granted and the Court instructed
the said cancellation was denied by the defendants. petitioners to pay the balance of P 1.8 million to private respondent who, in turn
were ordered to execute a deed of absolute sale and to surrender possession of the
disputed property to petitioners.
Ponce De Leon vs. Syjuco G.R. L-3316
Upon the appeal of the private respondent to the CA, the court upheld the earlier
decision of the RTC regarding the validity of the rescission made by private Facts:
respondents. The plaintiff obtained from defendant Syjuco on May 5, 1944, a loan of P200,000
and on July 31, 1944, another loan of P16,000, payable within one year from May 5,
Issue: Whether the rescission of contract made by the private respondent is valid. 1948." On November 15, 1944, the plaintiff offered to pay the entire indebtedness
plus all the interest up to the date of maturity. Upon Syjuco's refusal to accept the
Held: There is a breach of contract because the petitioners did not merely stopped tendered payment, the plaintiff deposited the amount with the clerk of the Court of
paying the mortgage obligations but they also failed to pay the balance purchase First Instance of Manila and instituted the present action to compel Syjuco to accept
price. Their conditional offer to Mr. Raymundo cannot take the place of actual payment. The records of the case were destroyed during the war, but they were duly
payment as would discharge the obligation of the buyer under contract of sale. reconstituted after the liberation.
Mr. Raymundo’s source of right to rescind the contract is Art. 1191 of the Civil Code The trial court sentenced the plaintiff to pay Syjuco the defendant the sum of
predicated on a breach of faith by the other party who violates the reciprocity P18,000 as principal and the further sum of P5,130 as interest thereon from August
between them. Moreover, the new obligations as preconditions to the performance 6, 1944, to May 5, 1949, or total sum of P23,130, representing the whole
of the petitioners’ own obligation were repudiation of an existing obligation, which indebtedness plus all the interest from August 6, 1944, to May 5, 1949, computed
was legally due and demandable under the contract of sale. according to the Ballantyne scale of values, with interest thereon at the rate of 6%
per annum from May 6, 1949, until said amount is paid in full, with costs against the
The breach committed by the petitioners was the non-performance of a reciprocal plaintiff. From this judgment Syjuco has appealed, claiming his right to be paid the
obligation. The mutual restitution is required to bring back the parties to their original sum of P216,000, actual Philippine currency, plus P200,000, as penalty agreed
situation prior to the inception of the contract. The initial payment and the mortgage upon in the contract.
payments advanced by petitioners should be returned by private respondents, lest
the latter unjustly enriched at the expense of the other. Rescission creates the Issue:
obligation to return the obligation of contract. To rescind, is to declare a contract void Whether or not the consignation made by the plaintiff valid in the light of the law and
at its inception and to put an end to it as though it never was. the stipulations agreed upon in the two promissory notes signed by the plaintiff?
The decision of the CA is affirmed with modification that private respondents are Held:
ordered to return to petitioners, the amount they have received in advanced The Supreme Court held in the negative. In order that consignation may be
payment effective, the debtor must first comply with certain requirements prescribed by law.
The debtor must show (1) that there was a debt due; (2) that the consignation of the
obligation had been made because the creditor to whom tender of payment was
Maglasang v. Northwestern University made refused to accept it, or because he was absent for incapacitated, or because
In compliance with the CHED’s requirement before a school could offer maritime several persons claimed to be entitled to receive the amount due (Art. 1176, Civil
transportation programs, on June 10, 2004, Northwestern University (Northwestern), Code); (3) that previous notice of the consignation have been given to the person
respondent, engaged the services of GL enterprises, petitioner, to install a new interested in the performance of the obligation (Art. 1177, Civil Code); (4)that the
Integrated Bridge System or IBS. The parties executed two contracts. amount due was placed at the disposal of the court (Art 1178, Civil Code); and (5)
Two months after the execution of the contracts, GL Enterprises started delivering that after the consignation had been made the person interested was notified
materials. However, when they were installing the components, Northwestern halted thereof (Art. 1178,Civil Code).
the operations.
GL enterprises requested for an explanation. Northwestern explained that the While it is admitted a debt existed, that the consignation was made because of the
stoppage was because the materials and equipment were substandard. It explained refusal of the creditor to accept it, and the filing of the complaint to compel its
that the components (1)were old; (2) did not have manual and warranty certificates; acceptance on the part of the creditor can be considered sufficient notice of the
(3) contained indications of being reconditioned machines; (4) did not meet with consignation to the creditor, nevertheless, it appears that at least two of the above
CHED and IMO standards. requirements have not been complied with. Thus, it appears that plaintiff, before
GL enterprises file a complaint for breach of contract. making the consignation with the clerk of the court, failed to give previous notice
The RTC rendered a decision that both parties are at fault. However, the CA, found thereof to the person interested in the performance of the obligation. It also appears
that GL enterprises was the only at fault, for delivering defective equipment that that the obligation was not yet due and demandable when the money was
materially and substantially breached the contracts. Applying Article 1191 of the Civil consigned, because, as already stated, by the very express provisions of the
Code, the CA declared the rescission of the contracts. document evidencing the same, the obligation was to be paid within one year after
Issue: Whether the CA gravely erred in (1) finding substantial breach on the part of May 5,1948, and the consignation was made before this period matured. The failure
GL enterprises. of these two requirements is enough ground to render the consignation ineffective.
Held: The Supreme Court said that, the CA correctly applied Article 1191, which And it cannot be contended that plaintiff is justified in accelerating the payment of
provides thus: the obligation because he was willing to pay the interests due up to the date of its
The power to rescind obligations is implied in reciprocal ones, in case of the obligors maturity, because, under the law, in a monetary obligation contracted with a period,
should not comply with what is incumbent upon him. the presumption is that the same is deemed constituted in favor of both the creditor
The injured party may choose between the fulfillment and the rescission of the and the debtor unless from its tenor or from other circumstances it appears that the
obligation, with the payment of damages in either case. He may also seek period has been established for the benefit of either one of them
rescission, even after he has chosen fulfillment, if the rescission becomes
impossible. Buce vs. CA/Tiongco
The court shall decree the rescission, unless there be just cause authorizing the GR 136913 May 12 2000
fixing of a period.
The Supreme Court said that the two contracts require substantial breach. Then, it FACTS:
went also to cite the definition, in the case of Cannu v. Galang, that substantial 1. BUCE LEASED 56-METER LAND FOR PERIOD OF 15 YEARS AND
breach are fundamental breaches that defeat the object of the parties entering into SUBJECT RENEWAL TO 10.
an agreement, since the law is not concerned with trifles. a) Constructed a building and monthly rental of P200.
In the case at hand, it was incumbent upon GL enterprises to supply components b) Tiongco demanded increase upto P1000.
that would create an IBS that would effectively facilitate the learning of the students. c) Tiongco gave letter to increase to P1500 pursuant to Rent
However, it miserably failed it meetings its responsibility. It supplied substandard Control Law.
equipment when it delivered components (1) were old; (2) did not have manual and i. Buce already had checks for P400 in which Tiongco refused to accept.
warranty certificates; (3) contained indications of being reconditioned machines; (4) d) Filed for complaint asking to have P200 rental for period of 15 years plus subject
did not meet with CHED and IMO standards. Also, GL enterprises did not also refute 10 year renewal.
that it delivered defective equipment. i. Tiongco said their actions are justified due to the Rent Control Law.
Evidently, the materials were not likely to pass the CHED and IMO standards. ii. Lease contract allowing renewal does not mean automatic renewal, just a
mutual agreement on both parties.
The Supreme affirmed in toto the decision of the Court of Appeals 2. RTC declared lease contract automatically renewed for 10 years:
a) Stipulations in contract giving right to Buce to contruct buildings and
improvements ISSUES:
b) Filing of Buce one year before the expiration of 15-year term. Was there a period fixed?
c) Fixed monthly rent to P400, continuous increased caused inevitable novation
of their contract. RULING:
3. CA reversed, ordered Buce to vacate the premises due to contract Yes. The fixing of a period by the courts under Article 1197 of the Civil Code of the
expiration and payment of P1000. Philippines is sought to be justified on the basis that petitioner (defendant below)
a) Stipulation was unclear as to who can may exercise option to renew. placed the absence of a period in issue by pleading in its answer that the contract
b) Without stipulation on option to renew must be upon agreement of parties. with respondent Philippine Sugar Estates Development Co., Ltd. gave petitioner
c) Since Tiongco were not agreeable to an extension, original term of lease Gregorio Araneta, Inc. "reasonable time within which to comply with its obligation to
should end. Their refusal to accept checks was justifiable. Because even construct and complete the streets."
when original specified only P200, tender and acceptance of increased rental If the contract so provided, then there was a period fixed, a "reasonable time;" and
novated contract of lease. all that the court should have done was to determine if that reasonable time had
4. BUCE: already elapsed when suit was filed if it had passed, then the court should declare
a Order to vacate premises is beyond bounds of authority because the case that petitioner had breached the contract,
she filed was for “specific performance” and not unlawful detainer.
b Phrase of “renewal for another 10 years at option of both parties” indicates Was it within the powers of the lower court to set the performance of the obligation
intention of parties to renew contract only upon mutal agreement. in two years time?
c Allowing her to put buildings and improvements, Tiongco’s acceptance of
increased rental signify renewal of contract. NO. Even on the assumption that the court should have found that no reasonable
3 TIONGCO: time or no period at all had been fixed (and the trial court's amended decision
a Subsequent acts do not automatically indicate renewal of contracts nowhere declared any such fact) still, the complaint not having sought that the Court
should set a period, the court could not proceed to do so unless the complaint
ISSUES: included it as first amended;
If “this lease shall be for a period of 15 years, subject to renewal for 10 years” make Granting, however, that it lay within the Court's power to fix the period of
stipulation automatic and subsequent to parties? NO. performance, still the amended decision is defective in that no basis is stated to
support the conclusion that the period should be set at two years after finality of the
HELD: judgment. The list paragraph of Article 1197 is clear that the period can not be set
PETITION IS GRANTED. CA REVERSED arbitrarily.
1. NOTHING IN THE CONTRACT THAT EXPRESSES AUTOMATIC The law expressly prescribes that “the Court shall determine such period as may
RENEWAL. under the circumstances been probably contemplated by the parties.”
a) Allowance on improvements and construction are not indicative of extension
of contract. It must be recalled that Article 1197 of the Civil Code involves a two-step process.
2. NOT INDICATED WHO MAY EXERCISE OPTION TO RENEW The Court must first determine that "the obligation does not fix a period" (or that the
a Thus, period of lease should be set for the benefit of both parties upon mutal period is made to depend upon the will of the debtor)," but from the nature and the
agreement. circumstances it can be inferred that a period was intended" (Art. 1197, pars. 1 and
Since private respondents were not amenable to renewal, they cannot be compelled 2). This preliminary point settled, the Court must then proceed to the second step,
to execute new. It is their prerogative to terminate lease at its expiration. and decide what period was "probably contemplated by the parties" (Do., par. 3).
Issue of possession was not among issued agreed by parties nor raised by So that, ultimately, the Court can not fix a period merely because in its opinion it is
or should be reasonable, but must set the time that the parties are shown to have
respondents.
intended. As the record stands, the trial Court appears to have pulled the two-year
period set in its decision out of thin air, since no circumstances are mentioned to
CA when overboard in ordering Buce to vacate premises. support it. Plainly, this is not warranted by the Civil Code.
. Does “reasonable time” mean that the date of performance would be indefinite?
ARANETA VS PHIL. SUGAR ESTATES
DEVELOPMENT CO. The Court of Appeals objected to this conclusion that it would render the date of
20 SCRA 330 performance indefinite. Yet, the circumstances admit no other reasonable view; and
this very indefiniteness is what explains why the agreement did not specify any
FACTS: exact periods or dates of performance.
J. M. Tuason & Co., Inc. is the owner of a big tract land situated in Quezon City, and
on July 28, 1950, [through Gregorio Araneta, Inc.] sold a portion thereof to
Philippine Sugar Estates Development Co., Ltd.
INCHAUSTI & CO. v. GREGORIO YULO
Facts: Ichausti & Co. can sue against one debtor despite
The parties stipulated, among in the contract of purchase and sale with mortgage, existence of debtors not sued because the obligation was
that the buyer will build on the said parcel land the Sto. Domingo Church and acquired solidarily.
Convent while the seller for its part will construct streets.
> Teodoro Yulo (then widow and children) borrowed money
But the seller, Gregorio Araneta, Inc., which began constructing the streets, is from Inchausti & Company for the exploitation and cultivation
unable to finish the construction of the street in the Northeast side because a certain of their haciendas > Children continued account with
third-party, by the name of Manuel Abundo, who has been physically occupying a
middle part thereof, refused to vacate the same; Both buyer and seller know of the
Inchausti (Hijos de T. Yulo) until balance amounted to P200k
presence of squatters that may hamper the construction of the streets by the seller. > June 26, 1908: Notarial Document all admitting
indebtedness and mortgaging undivided 6/9 of their 38
On May 7, 1958, Philippine Sugar Estates properties > January 11, 1909: New document for mortgage
Development Co., Lt. filed its complaint against J. M. Tuason & Co., Inc., and credit for the balance > August 12, 1909: Notarial Document
instance, seeking to compel the latter to comply with their obligation, as stipulated in severally and jointly admitting indebtedness and promising to
the above-mentioned deed of sale, and/or to pay damages in pay in 5 installments at the rate of P50k every June 30 with
the event they failed or refused to perform said obligation. maturity and demandable upon failure to pay > March 27,
The lower court and the appellate court ruled in favor of Phil. Sugar estates, and
1911: Action for Recovery of a sum of money against
gave defendant Gregorio Araneta, Inc., a period of two (2) years from notice hereof, Gregorio Yulo (one of the children) > May 12, 1911: Notarial
within which to comply with its obligation under the contract, Annex "A". Document (entered into a new agreement) by Francisco,
Manuel and Carmen Yulo recognizing their debt but alleging
Gregorio Araneta, Inc. resorted to a petition for review by certiorari to this Court.
that it has been reduced to P225k > Inchausti plea to recover *Guarantor who binds himself in solidum with the principal
P253,445.42 GRANTED debtor under the provisions of the second paragraph does
not become a solidary co-debtor to all intents and purposes.
> Inchausti can sue just one obligor even if there are other There is a difference between a solidary co-debtor and a
obligors > debtors obligated themselves in solidum > when fiador in solidum (surety). The latter, outside of the liability he
the obligation is constituted as a conjoint and solidary assumes to pay the debt before the property of the principal
obligation each one of the debtors is bound to perform in full debtor has been exhausted, retains all the other rights,
the undertaking which is the subject matter of such obligation actions and benefits which pertain to him by reason of the
> creditor can bring its action in toto against any one of them fiansa; while a solidary co-debtor has no other rights than
those bestowed upon him in Section 4, Chapter 3, Title I,
> Different amounts of debt with different debtors > May 12, Book IV of the Civil Code
1911 where Inchausti & Company stipulated with some of the
solidary debtors (Manuel, Francisco, and Carmen Yulo) QUIOMBING v. COURT OF APPEALS, and Sps.
diverse installments and conditions > did not break the FRANCISCO and MANUELITA A. SALIGO
solidarity stipulated in the instrument of August 12, 1909 >
solidarity may exist even though the debtors are not Facts: Solidary creditor Quiombing can exercise action for
bound in the same manner and for the same periods and payment against debtor even without the other solidary
under the same conditions creditor because either one can mutually represent the other
to whom the debtor are both liable
Contention of Yulo as Defense: (1222) avail of defenses
available to him even if not personal to him but personal to > August 30, 1983: Construction and Service Agreement
co-debtors ~ solidary debtor with co-debtors and hence, where Nicencio Tan Quiombing and Dante Biscocho jointly
decrease in one, decrease in all > BUT! Solidarity may exist and severally bound themselves to construct a house of Sps.
even if they are bound in different manners Francisco and Manuelita Saligo for P137,940.00, > October
10, 1984: Agreement where sps. acknowledged house
Agreement of reduction was only changed in relation to the completion and undertook to pay the balance > November
party’s share of the debt > that 3 of them are liable only for 19, 1984: Promissory note by Saligo for P125,363.50 >
225 and not 253 total > Claim of creditor against one who is October 9, 1986: Action for recovery of amount by Quiombing
not party to reduction is only 3/6 of 28k (28k ~ difference of due to failure of sps. to pay the balance > Contention of Sps:
price) > liability of 3 is only 1/6 of 225 and difference in price that Biscocho was an indispensable party and should have
is paid by other co-debtor not party to reduction > others not been included as co-plaintiff > Appeal by Quiombing that as a
bound to decrease solidary creditor he could act by himself alone in the
That the nature of the obligation has changed ~ from 253 to enforcement of his claim against the private respondents
225 > that there was no novation but 3 were not authorized
to reduce debt for everyone ~ COURT MISAPPLIED 1215 ~ > SOLIDARITY BETWEEN Quiombing and Biscocho >
Co-debtors not agents of each other authority of each creditor to claim and enforce the rights of
all, with the resulting obligation of paying every one what
INCIONG, JR. v. CA belongs to him > no merger, much less a renunciation of
rights, but only mutual representation > Immaterial who sued
Facts: Debt of 3 signatories of promissory note can be held the sps. who were liable to either of the 2 creditors > full
against just one debtor because the debt was acquired jointly satisfaction of a judgment obtained against them by
and severally where as co-maker of the debt, one is liable for Quiombing would discharge their obligation to Biscocho, and
the entire debt. vice versa > not necessary for both Quiombing and Biscocho
to file the complaint > either one is indispensable
> February 3, 1983: Promissory Note worth P50k by Atty.
Baldomero Inciong, Jr., Rene Naybe and Gregorio > Sps. to pay and be concerned only with Quiombing > Art.
Pantanosas as solidary co-makers for a loan from/for 1214 that "the debtor may pay any of the solidary creditors;
payment to Philippine Bank of Communications to engage in but if any demand, judicial or extrajudicial, has been made by
logging operation business > note due on May 5, 1983 > any one of them, payment should be made to him" >
Failure to pay > Demand by Bank by letter for payment > Biscocho may later claim his share from Quiombing but that
January 24, 1986: Complaint for Collection of sum of P50k decision is for him alone to make > as far as the debtors are
against 3 by Bank > Dismissal against Pantanosas (prayed concerned, payment of the judgment debt to the complainant
for by Bank), migration to Saudi Arabia of Naybe will be considered payment to the other solidary creditor even
if the latter was not a party to the suit
> Contention: Fraudulent promissory note since he was
made to believe that the blank promissory note he signed *A joint obligation is one in which each of the debtors is liable
was only for P5k > not established only for a proportionate part of the debt, and each creditor is
entitled only to a proportionate part of the credit. A solidary
> Dismissal of Pantanosas and Naybe not a release of his obligation is one in which each debtor is liable for the entire
obligation > signed as a solidary co-maker and not guarantor obligation, and each creditor is entitled to demand the whole
> promissory note expressly states that the 3 are jointly and obligation. Hence, in the former, each creditor can recover
severally liable > one debtor can be held liable for the entire only his share of the obligation, and each debtor can be
obligation > creditor determines against whom he will enforce made to pay only his part; whereas, in the latter, each
collection creditor may enforce the entire obligation, and each debtor
may be obliged to pay it in full.
*Solidary or joint and several obligation is one in which
each debtor is liable for the entire obligation, and each
creditor is entitled to demand the whole obligation
*Art. 1212: Each one of the solidary creditors may do
whatever may be useful to the others, but not anything which
may be prejudice to the latter.
> REMEDY OF JARING AGAINST ALIPIO SPOUSES:
*Indispensable parties are those with such an interest in the
controversy that a final decree would necessarily affect their > Sec. 6, Rule 78 of the Revised Rules of Court: Creditor
rights, so that the court cannot proceed without their may (1) file a claim against the Alipios in the proceeding for
presence. Necessary parties are those whose presence is the settlement of the estate of petitioner's husband; (2) apply
necessary to adjudicate the whole controversy, but whose
in court for letters of administration in his capacity as a
interests are so far separable that a final decree can be
made in their absence without affecting them. principal creditor; (3) the allowance of will, depending on
whether petitioner's husband died intestate or testate.
Andal sold the lot to Juan Carlos on January 18, 1960. As Trial court found that Juan Carlos had finished more
neither Andal nor Juan Carlos built a house on the lot within than 50 per cent of his house by April, 1961, or barely a
the stipulated period, the Makati Development Corporation, month after the expiration on March 31, 1961 of the
on April 3, 1961, after the lapse of the two-year period, sent a stipulated period. There was therefore a partial performance
notice of claim to the Empire Insurance Co. advising it of of the obligation within the meaning and intendment of article
Andal's failure to comply with his undertaking. Demand for 1229. The penal clause in this case was inserted not to
the payment of P12,000 was refused, whereupon the Makati indemnify the Makati Development Corporation for any
Development Corporation filed a complaint in the Court of damage it might suffer as a result of a breach of the contract
First Instance against the Empire Insurance Co. to recover but rather to compel performance of the so-called "special
on the bond in the full amount, plus attorney's fees. In due condition" and thus encourage home building among lot
time, the Empire Insurance Co. filed its answer with a third- owners in the Urdaneta Village. Considering that a house
party complaint against Andal. It asked that the complaint be had been built shortly after the period stipulated, the
dismissed or, in the event of a judgment in favor of the Makati substantial, if tardy, performance of the obligation, having in
Development Corporation, that judgment be rendered view the purpose of the penal clause, fully justified the trial
ordering Andal to pay the Empire Insurance Co. whatever court in reducing the penalty. Still it is insisted that Carlos'
amount it maybe ordered to pay the Makati Development construction of a house on the lot sold cannot be considered
Corporation, plus interest at 12%, from the date of the filing a partial performance of Andal's obligation because Carlos
of the complaint until said amount was fully reimbursed, and bears no contractual relation to the Makati Development
attorney's fees. Corporation. Indeed the stipulation in this case to commence
the construction and complete at least 50 per cent of the
In his answer, Andal admitted the execution of the vendee's house within two years cannot be construed as
bond but alleged that the "special condition" in the deed of imposing a strictly personal obligation on Andal. To adopt
sale was contrary to law, morals and public policy. He such a construction would be to limit Andal's right to dispose
averred that, at any rate, Juan Carlos had started of the lot. There is nothing in the deed of sale restricting
construction of a house on the lot. The lower court rendered Andal's right to sell the lot at least within the two-year period
judgment, sentencing the Empire Insurance Co. to pay the and we think it plain that a reading of such a limitation on one
Makati Development Corporation the amount of P1,500, with of the rights of ownership must rest on more explicit
interest at the rate of 12% from the time of the filing of the language in the contract.
complaint until the amount was fully paid, and to pay
attorney's fees in the amount of P500, and the proportionate
part of the costs. The court directed that in case the amount ANTONIO TAN v. COURT OF APPEALS and CCP
of the judgment was paid by the Empire Insurance Co., Andal
should in turn pay the former the sum of P1,500 with interest
at 12% from the time of the filing of the complaint to the time
of payment and to pay attorney's fees in the sum of P500
and proportionate part of the costs. The Makati Development Facts: Default in payment effected penalty interest and its
Corporation appealed directly to this Court.
interest, different and separate from principal interest, as
The appellant argues that Andal became liable for the stipulated in the promissory note.
full amount of his bond upon his failure to build a house
within the two-year period which expired on March 31, 1961
and that the trial court was without authority to reduce
Andal's liability on the basis of Carlos' construction of a
house a month after the stipulated period because there was > Promissory Notes for two Loans granted by CCP to Antonio
no privity of contract between Carlos and the Makati Tan worth P2M each > Maturity dates: May 14, 1979 and July
Development Corporation. 6, 1979 > Defaulted but with partial payments > Restructure
of Loan (August 31, 1979) with promissory note worth
ISSUE: P3,411,421.32 ~ payable in 5 installments, last on December
Is Andal liable for the full amount of his bond upon his failure 31, 1980 ~ COMPOUNDING INTERESTS FOR PENALTY:
to comply with the special condition stipulated?
“With interest at the rate of 14% per annum from the date
RULING: hereof until paid...In case of non-payment of this note at
No. While it is true that in obligations with a penal maturity/on demand or upon default of payment of any
sanction the penalty takes the place of damages and the portion of it when due, I/We jointly and severally agree to pay
payment of interest in case of non-compliance and that the additional penalty charges at the rate of 2% per month on the
obligee is entitled to recover upon the breach of the total amount due until paid, payable and computed monthly.
obligation without the need of proving damages,it is
Default of payment of this note or any portion thereof when
nonetheless true that in certain instances a mitigation of the
due shall render all other installments and all existing
promissory notes made by us in favor of the CCP the center will be accepting your proposed payment scheme
immediately due and demandable” > Defaulted in all > Letter with the downpayment of P160,000.00 and monthly
(January 26, 1982) by Tan proposing payment scheme for remittances of P60,000.00” > NOT SUSPENSIVE
restructured loan (20% upon approval and 60% in 36 equal CONDITIONAL OBLIGATION ~ responsibility of Tan to inform
monthly instalments) > Request (October 20, 1983) by Tan to and bring his administrative appeal to COA and OP of his
postpone loan payments due to business failures > Letter application for condonation of interest and surcharge
Demand (May 30, 1984) by CCP for full payment in 10d of
restructured loan, worth P6,088,735.03 > Default > Suit for
Collection (August 29, 1984) by CCP > RTC and CA in favour
of CCP, charging interest, surcharges, attorney’s fees and COUNTRY BANKERS INSURANCE CORPORATION and
exemplary damages ENRIQUE SY v. COURT OF APPEALS
> Contention of Tan > acquired loan only to help Wilson Facts: Default of lessee warranted the penalty of forfeiture of
Lucmen who had suddenly disappeared > RTC: little the cash deposit in favour of lessor because such stipulation
evidence to prove it and should filed a third party complaint in agreement is a penal clause that is valid in order to punish
instead > Abandoned on CA Appeal but appealed interest, the lessee for non-payment. However, penalty was not
surcharge and the principal which were added together and substituted for damage claim by lessor as a result of breach
the total sum interest that was imposed and asked reduction of contract because it arose not from breach of contract per
of the penalties and charges on his loan obligation se but from damages resulting from non-fulfillment of
principal obligation, ie lost opportunity costs of lessor.
> Contentions of Sy > that deposit of P600k was too big; that
OVEC assured him that no forfeiture will happen; that he had
> Interest and Surcharge NOT Conditional to Assistance of spent P100k for major repairs on the theaters; that he had
CCP in Tan’s application in COA ~ September 18, 1988 paid P48k for electricity which OVEC used thru an illegal
Letter from CCP: “With reference to your appeal for connection > RTC in favour of OVEC ~ valid repossession
condonation of interest and surcharge, we wish to inform you pursuant to a valid stipulation plus damages > for Sy to pay
that the center will assist you in applying for relief of liability damages worth P10k/m from February to November 1980,
through the (recommendation of) Commission on Audit and totaling P100k with interest on each amount of P10k from the
Office of the President (to House of Rep for approval)...While time the same became due ~ Opportunity Costs against
your application is being processed and awaiting approval, OVEC
denied > Complaint for specific performance with damages >
Dismissed for failure to prosecute > Refile alleging breach of
> Valid Forfeiture Clause ~ forfeiture contract for deliberate non-fulfillment of their obligations under the
contract to sell > Compromise Agreement (November 29, 1977) ~
of the remaining deposit still in the possession of the lessor, Payment of P240k by December 18, 1977 or by January 27, 1978
without prejudice to any other obligation still owing, in the but worth P250k; Otherwise, Contract shall be deemed rescinded,
event of the termination or cancellation of the agreement by right of possession shall be enforced; Lim shall voluntarily
reason of the lessee's violation of any of the terms and
surrender and vacate the same without further notice or demand >
conditions of the agreement > A PENAL CLAUSE ~ that the
deposit of P600k shall be deemed forfeited, without prejudice
Defaulted > Motion for issuance of a writ of execution (January 28,
to any other obligation still owing by the lessee to the lessor 1978) > Opposition (March 27, 1978) alleging that she had
> Forfeiture penalty PLUS Damages worth P100k (due to complied and demanded that they immediately execute the
OPPORTUNITY COSTS in P10k monthly increase in rental necessary documents to transfer the title to the properties
from P50k to P60k because RTG Productions, Inc. offered to
lease the property at P60k which OVEC failed to realize for
10m from February to November 1980, totaling P100k ~
P100k not redeemed due to the issuance of the injunction
> Compliance by Singh > Failure to pay the full amount by January
against the P290,000.00 remaining cash deposit) ~ cannot
be substituted ~ penalty for punishment of obligor, damages
27, 1978 was due to fault of appellees > She went to the sala of
for loss of obligee Judge Bautista on the appointed day to make payment, as agreed
upon in their compromise agreement but the appellees were not
there to receive it; their counsel informed her that he had no
authority to receive and accept payment but invited her to the
> Penal Clause is an accessory obligation which the parties house of the petitioners to effect payment but the petitioners were
attach to a principal obligation for the purpose of insuring the not there either until 4PM but never did arrive > She returned the
performance thereof by imposing on the debtor a special next day (January 28, 1978 to the office of the Clerk of the to
presentation (generally consisting in the payment of a sum of deposit the balance of the purchase price but cashier was not there
money) in case the obligation is not fulfilled or is irregularly or to receive it because it was Saturday > Returned Monday and
inadequately fulfilled > PURPOSE: To punish the obligor > deposited the amount of P30k to complete the payment of the
generally, the penalty shall substitute the indemnity for
purchase price of P250k
damages and the payment of interests in case of non-
compliance ~ proof of actual damages suffered by the
creditor is not necessary in order that the penalty may be
demanded > EXCEPTIONS: (1) when there is a stipulation to
the contrary; (2) when the obligor is sued for refusal to pay > Non-appealable of Compromise Agreements > the rule is that a
the agreed penalty; (3) when the obligor is guilty of fraud > judgment rendered in accordance with a compromise agreement is
Obligee can recover not only the penalty but also the not appealable > immediately executory unless a motion is filed to
damages resulting from non-fulfillment of the principal set aside the compromise agreement on the ground of fraud,
obligation
mistake or duress, in which case an appeal may be taken from the
order denying the motion > that an order of execution of judgment
is not appealable > EXCEPTION: if terms does not conform to the
essence or when the terms of the judgment are not clear and there
PILAR DE GUZMAN, ROLANDO GESTUVO, and MINERVA
is room for interpretation and the interpretation given by the trial
GESTUVO v. CA, and SINGH
court as contained in its order of execution is wrong in the opinion
of the defeated party
Facts:
> No Proof of Second Notice > that consignation has been made Facts: Debtors Mijares, et al admitted debt to Sotto and expressed
and that the checks were in fact deposited > No official receipt willingness to pay amount by depositing it in court but subject to
allegedly issued by the Clerk of Court was presented EXCEPT for the condition that the mortgage they had executed as security be
July and August 1977 > That these had been paid only on cancelled. Such condition is valid because the right to consign
November 20, 1979 > HENCE, testimony of Soco on October 24, belongs to the debtor exclusively who cannot be compelled by the
1979 that Francisco had not paid the monthly rentals for these court to make such deposit against its will.
months > Francisco had to make a hurried deposit on the following
month to repair his failure
Moreover, it appears that only the interest of 18% per annum was
agreed upon by the parties. The manager’s check in the amount of
672,900 was enough to satisfy the obligation. There being a valid so difficult as have been beyond their contemplation > it would be
tender of payment in an amount sufficient to extinguish the doing violence to that intention to hold the obligor still responsible >
obligation, the consignation is valid. that performance will result in situation where other party would be
unustly enriched at the expense of the other > inequitous
The amount consigned with the trial court can no longer be distribution of proceeds and exposure of plaintiff to implacable
withdrawn by petitioner because respondent’s prayer in his answer losses, resulting in an unconscionable, unjust and immoral
that the amount consigned be awarded to him is equivalent to an situation
acceptance of the consignation, which has the effect of
extinguishing petitioner’s obligation.
> ART. 1267 CANNOT APPLY > REMEDY HAS NO LEGAL BASIS
> Seeks NOT THE RELEASE from compliance of the obligation as
OCCENA v. HON. JABSON, and TROPICAL HOMES, INC. contemplated by Art. 1267 that gives a positive right in favor of the
obligor to be released from the performance of an obligation in full
or in part when its performance has become so difficult as to be
Facts: Remedy sought by Tropical Homes, Inc., which is for the manifestly beyond the contemplation of the parties > Seeks
court to modify its contract with Occenas allegedly due to modification of the terms and conditions of the Contract by fixing
unanticipated rise in prices that would leave the former at a loss, the proper shares that should pertain to the parties out of the gross
cannot be granted for lack of legal basis. Impossibility of proceed > Art. 1267 does not grant the courts this authority to
performance which Art. 1267 speaks of is for the release from remake, modify or revise the contract which has the force of law
obligation by the debtor but not the modification of contract which between the parties, so as to substitute its own terms for those
has the force of law between the parties. covenanted by the parties themselves > no legal basis; no cause of
action
> Art. 1266 NOT APPLICABLE ~ "The debtor in obligations to do >> obligation "to give" is a prestation which consists in the delivery
shall also be released when the prestation becomes legally or of a movable or an immovable thing in order to create a real right,
physically impossible without the fault of the obligor" ~ that purpose or for the use of the recipient, or for its simple possession, or in
of the contract did not materialize due to unforeseen events and order to return it to its owner
causes beyond its control > BUT (1) 1266 applies only to
obligations "to do," and not to obligations "to give," ie to pay >> principle of rebus sic stantibus or doctrine of unforeseen events
rentals; (2) ACTUAL REASON for discontinuing project is not legal > parties stipulate in the light of certain prevailing conditions, and
or physical impossibilities BUT financial as well as technical once these conditions cease to exist, the contract also ceases to
difficulties and abrupt change in political stability after EDSA (basis of Article 1267) > BUT parties to the contract must be
(without specifying which circumstances) AND NOT the alleged presumed to have assumed the risks of unfavorable developments
insufficiency of the Temporary Use Permit > Mere pecuniary OTHERWISE it would endanger the security of contractual
inability to fulfill an engagement does not discharge a contractual relations > APPLIES ONLY TO absolutely exceptional changes of
obligation, nor does it constitute a defense to an action for specific circumstances that equity demands assistance for the debtor
performance > Ninoy assassination on August 21, political
upheavals, Marcos declaration of snal election on November 3,
Contract on November 18 ~ PNCC knew about political climate >> Can 1267 amend contracts according to equity? What justified
NAGA?
Issue: Whether or not ETPI is liable to pay 14th, 15th and 16th
month bonuses for the year 2003 and 14th month bonus for the
year 2004 to the members of respondent union. > Loan Agreement (May 10,1979) between Victor Yam and Yek
Suk Lent (solidary) and MANPHIL Investment Corporation where
latter loaned P500k to former and former secured the loan with a > What is a nature of a condonation: Donation (an act, not a
chattel mortgage on their printing machinery > Second (New) Loan contract) ~ a contract in the sense that acceptance by the donee is
Agreement worth P300k, evidenced by two promissory notes (July necessary
3, 1981 and September 30, 1981) with same 2% monthly penalty,
10% attorney’s fees, annual interest increased to 14% and the
service charge reduced to 1% per annum > PAYMENT OF FIRST
> Inofficious donations >
LOAN worth P500k (April 2, 1985) > MANPHIL placed under
receivership (November 4, 1985) by Central Bank (Ricardo Lirio as
GAN TION v. HON. COURT OF APPEALS, HON. JUDGE
receiver and Cristina Destajo as in-house examiner) > Partial AGUSTIN P. MONTESA, as Judge of the Court of First Instance
Payment of Second Loan (May 17, 1986) worth P50k > Letter by of Manila, ONG WAN SIENG and THE SHERIFF OF
PPW (June 18, 1986) proposing to settle their obligation > Counter-
Offer by MANPHIL (July 2, 1986) that it would reduce the penalty
charges up to P140 provided petitioners can pay their obligation on
or before July 30, 1986 > Meeting between Victor Yam and wife Facts: Attorney’s fees granted in favour of tenant Ong can be the
subject of legal compensation in terms of Ong’s debt to landowner
Elena Yam and Carlos Sobrepeñas (MANPHIL President) where Gan comprising of unpaid rents because the monetary award is
latter agreed to waive the penalties and service charges, provided made in favour of the litigant and not his counsel as misunderstood
they pay the principal and interest, computed as of July 31, 1986 ~ by CA. Hence, Ong is the creditor of the debt of Gan. Gan cannot be
P410,854.47 (Principal and Interest) (Total of Principal, Interest, made to pay for attorney’s fees first before he can collect debt of
Ong because debt of Gan to Ong covering attorney’s fees may be
Penalties and Service Charges is P727,001.35; Penalties and deducted from Ong’s debt to Gan covering unpaid rents.
Service Charges is P266,146.88) > Payment (July 31, 1986) by
PPW of P410,854.47 thru Pilipinas Bank check with notation "full
payment of IGLF LOAN" > Receipt acknowledged by Destajo >
Demand Letters (September 4, 1986, September 25, 1986) for > Ejectment Case (1961) by Landowner Gan Tion against Tenant
payment of balance worth P266,146.88 > Non-response and non- Ong Wan Sieng for alleged non-payment of rents (covering August
and September 1961) worth P360 (P180/m) > Contention of Ong
payment > Suit for the collection of P266,146.88 or foreclosure of
that rent was P160/m and that he had offered to pay but was refused
the mortgaged machineries > CFI Held initially in favour of Gan but reversed upon appeal in
favour of Ong, ordering payment by Gan to Ong of P500 as
attorney's fees > Demand by Gan by way of Notice (October 10,
1963) of payment of rents in arrears worth P4,320 (covering August
> Contention of PPW: Condonation of Penalties and Service 1961 to October 1963) > Writ of Execution obtained by Ong of the
Charges judgment for attorney's fees in his favour > Certiorari by Gan in CA
pleading legal compensation ~ that Ong was indebted to him in the
sum of P4,320 for unpaid rents ~ CA held that P500 as attorney’s fee
is for the counsel, and not defendant’s Ong ~ fee could not be the
subject of legal compensation because its real creditor was the
> NO CONDONATION BECAUSE IT WAS NOT IN WRITING > Art. defendant's counsel ~ the parties are not creditors and debtors of
1270, par. 2: express condonation must comply with the forms of each other in their own right (Art. 1278, Civil Code) and each one of
donation and Art. 748, par. 3: donation and acceptance of a them is not bound principally and at the same time not a principal
creditor of the other (Art. 1279)
movable (including obligations under Art. 417, par. 1), the value of
which exceeds P5,000,00, must be made in writing > Voucher with
notation “full payment of IGLF loan” is NOT SUFFICIENT ~ merely
states PPW’s intention in making the payment but in no way does it > ATTORNYEY’S FEES CAN BE SUBJECT OF LEGAL
bind MANPHIL > acceptance and signature of the voucher by COMPENSATION > award is made in favor of the litigant, not of his
counsel ~ an indemnity for damages recoverable by the litigant >
Destajo merely acknowledged receipt of the payment ~ she had no
Hence, litigant, not his counsel, is the judgment creditor and who
authority to condone any indebtedness (acceptance of notation if in may enforce the judgment by execution > Such credit, therefore,
receipt would have been valid as an admission against interest) > may properly be the subject of legal compensation > Gan cannot be
BUT EVEN IF CONDONATION WAS WRITTEN, it was made after made to pay for attorney’s fees first before he can collect debt of
Ong because debt of Gan to Ong covering attorney’s fees may be
MANPHIL had been placed under receivership and thus, President
deducted from Ong’s debt to Gan covering unpaid rents
had no authority to condone the debt ~ suspension of the authority
of a corporation and of its directors and officers over its property
and effects, such authority being reposed in the receiver
G. R. No. L-74027 December 7, 1989
>> de Leon and Silahis not a debtor/creditor of each other > Alleged > Valid verbal authorization by Edvin > Testimony by Manager and
debit memo where de Leon is alleged to be bound to give Silahis Assistant Manager that Reyes instructed Assistant Manager Mrs.
20% commission for the sale is non-existent > No agreement, verbal Bernardo to debit the amount from his joint account with his wife and
or otherwise, nor was there any contractual obligation between De then promised to drop by to give us a written confirmation > That
Leon and Silahis prohibiting any direct sales to Dole Philippines, Inc. Manager did not authorize the debit but merely followed the
by de Leon instruction of Reyes > Reyes’ testimony was uncorroborated and he
is deemed to be uncredible because of past fraudulent acts
(concealed Fernandez’ death from Bank and US Treasury, received
and deposited mothly pension to an account he later closed, in which
application he declared Fernandez to still be alive)
>> Though debt is admitted, Claim is disputed/non-existent > 20%
commission on the subject sale to Dole Philippines, Inc. is vigorously
disputed/unliquidated/unclear > Nothing in the debit memo
obligating de Leon to pay a commission to Silahis for the sale of P
111,000.00 worth of sprockets to Dole > DEBIT OF DEBT FROM ACCOUNT AS VALID COMPENSATION >
Bank is debtor of Reyes who is creditor as a depositor of the Bank
while Reyes is debtor of Bank who is creditor because of the
dishonoured pension tha Reyes needed to refund > Debts involved a
sum of money which are due, liquidated and demandable > Mutuality
of parties EVEN without the wife as co-owner of account ~ she never
asserted her right and has never objected to the debit > The rule as
> Legal Compensation operates automatically when all the requisites to mutuality is strictly applied at law. But not in equity, where to allow
in Art. 1279 of the Civil Code are present ~ even without the consent the same would defeat a clear right or permit irremediable injustice
or knowledge of the creditors and debtors
>> Compensation > when two persons, in their own right, are
creditors and debtors of each othe > 1290: compensation takes
effect by operation of law, and extinguishes both debts to the
G.R. No. 116792 March 29, 1996 concurrent amount, even though the creditors and debtors are not
aware of the compensation > takes place ipso jure > HENCE
operates even against the will of the interested parties and even Company of Libya (from where the P34,340.38 was deducted) was
without the consent of them > effects arise on the very day on which intended for deposit in Lapez’s account in PNB > Art. 1279 can apply
all its requisites concur
> RE: DOUBLE CREDIT: PNB and Lapez are debtors and creditors
>> Why legal compensation > COURT could have just stopped with of each other ~ Lapez creditor as a depositor while PNB creditor due
the authorization of Edvin to double credits erroneously made on Lapez’s account
> Prescription of legal compensation > Art. 1145, which fixes the
prescriptive period for actions upon a quasi contract (such as
solution indebiti) at six years
> Two remittances by Ramon Lapez, first on November 1980 worth (5) That over neither of them there by any
$5,679.23 and second on January 1981 worth $5,885.38 to his PNB retention or controversy, commenced by third
Account in the Philippines > Lapez’s account in PNB was “doubly persons and communicated in due time to the
credited,” amounting to the total of P87,380.44 > PNB demanded by debtor.
letter (October 23, 1986) the refund of the duplicated credits
erroneously made on Lapez’s account, 5y later > Lapez made two
more remittances from NBC of Jeddah to be sent to Citibank and
then from Libya to Lapez’s account in PNB > PNB deducted
> Principle of solutio indebiti: If something is received when there is
$2,627.11 and P34,340.38, respectively, from these remittances
no right to demand it, and it was unduly delivered through (sic)
without Lapez’s knowledge and consent but issued him a receipt
mistake, the obligation to return it arises. (Article 2154, Civil Code of
February 18, 1987 > Lapez demanded recovery of the remittances
the Phil.)
FACTS:
> Crop Loan Financing Scheme between sugarland owners and On July 24, 1990, respondent Atty. Vicente D. Millora (Vicente)
planters Mirasols and financier Philippine National Bank > PNB obtained a loan of P400,000.00 from petitioner Dr. Jesus M.
financed sugar production for crop years 1973-1974 and 1974-1975 Montemayor (Jesus) as evidenced by a promissory note executed by
as secured by Credit Agreements, a Chattel Mortgage on Standing Vicente. On August 10, 1990,the parties executed a loan contract
Crops, and a Real Estate Mortgage in its favor ~ Chattel Mortgage wherein it was provided that the loan has a stipulated monthly
empowered PNB as Mirasols’ attorney-in-fact to negotiate and to sell interest of 2% and that Vicente had already paid the amount of
the latter’s sugar in both domestic and export markets and to apply P100,000.00 as well as the P8,000.00 representing the interest for
the proceeds to the payment of their obligations to it > PD 5792 the period July 24 to August 23, 1990.
(November 1974) required PNB to finance Philippine Exchange Co.,
Inc. and latter is to purchase sugar allocated for export where
whatever profit PHILEX might realize from sales of sugar abroad was
to be remitted to a special fund of the national government, after Subsequently and with Vicente’s consent, the interest rate was
commissions, overhead expenses and liabilities had been deducted increased to3.5% or P10,500.00 a month. From March 24, 1991 to
~ Proceeds of PNB all went to national government leaving nothing July 23, 1991, or for a period of four months, Vicente was supposed
with which to deduct from the Mirasols’ debt > Demand by Mirasols to pay P42,000.00 as interest but was able to pay only P24,000.00.
of an account of the proceeds of their sugar sales to PNB ~ believed This was the last payment Vicente made. Jesus made several
that there were more than enough to pay their obligations > ignored demands for Vicente to settle his obligation but to no avail. Thus, on
until PNB demanded the Mirasols to settle their due and demandable August 17, 1993, Jesus filed before the RTC of Quezon City a
accounts (P15,964,252.93 for crop years 1973-1974 and 1974-1975) Complaint for Sum of Money against Vicente which was docketed as
> Mirasols conveyed to PNB real properties valued at P1,410,466 by CivilCase No. Q-93-17255. On October 19, 1993, Vicente filed his
way of dacion en pago (August 4, 1977) and foreclosure of their Answer interposing a counterclaim for attorney’s fees of not less than
mortgaged properties amounting to P3,413,000 > Deficiency still of P500,000.00.Vicente claimed that he handled several cases for
P12,551,252.93 > Refusal of PNB to give an account of their alleged Jesus but he was summarily dismissed from handling them when the
proceeds from export of sugar > Suit for accounting, specific instant complaint for sum of money was filed.
performance, and damages against PNB (August 9, 1979)
ISSUE:
> Contention of Mirasols: Payment of loans by way of legal
compensation using the proceeds of export sales of sugar > Whether compensation can properly be applied despite the absence
Invalidity of foreclosure and dacion en pago of a specific amount in the decision representing respondent’s
counter claim against the specific amount of award mentioned in the
decision in favor of the petitioner.
(1) That each one of the obligors be bound principally, and that he be
>>> Did the chattel mortgage give PNB ownership of the sugar at the same time a principal creditor of the other;
which it can sell abroad and merely allowed Mirasols to deduct from
(2) That both debts consist in a sum of money, or if the things due
it their obligation in relation to the loan? Or was it just an authority to
are consumable, they be of the same kind, and also of the same
sell but not to profit where profit still principally owned by Mirasols
quality if the latter has been stated;
but as way of commission, PNB gets share as payment?
(3) That the two debts be due; complies “with the obligation to pay the amount of P5,000
representing balance of the purchase price of a parcel of land” to
(4) That they be liquidated and demandable; Magdalena Estates > Payment by Luzon of P5k to Magdalena
Estates (June 20, 1958) > Demand by Magdalena Estates for
(5) That over neither of them there be any retention or controversy, payment of P655.89 as accumulated interests on the principal of P5k
commenced by third persons and communicated in due time to the > Refusal by Sps. Rodriguez > Suit for Collection > CFI Held in
debtor. favour of Magdalena Estates for Sps. Rodriguez to pay P655.89,
among others
"A debt is liquidated when its existence and amount are determined.
It is not necessary that it be admitted by the debtor. Nor is it > Contention of Sps. Rodriguez > Bond Payment novated the
necessary that the credit appear in a final judgment in order that it Obligation for Promissory Note > that there was no demand made by
can be considered as liquidated; it is enough that its exact amount is Magdalena Estates for the payment of accrued interest in the bond
known. And a debt is considered liquidated, not only when it is payment, that it demanded from the Luzon Surety Co., Inc., in the
expressed already in definitefigures which do not require verification, capacity of the latter as surety, the payment of the obligation, and
but also when the determination of the exact amount depends only that it accepted unqualifiedly the amount of P5,000 as performance
on a simple arithmetical operation x xx. by the obligor and/or obligors of the obligation in its favour > that the
unqualified acceptance of payment without exercising its right to
apply P655.89 to the payment was a waiver/condonation of the
interests due
"When the defendant, who has an unliquidated claim, sets it up by
way of counterclaim, and a judgment is rendered liquidating such
claim, it can be compensated against the plaintiff’s claim from the
moment it is liquidated by judgment. We have restated this in Solinap > Promissory Note was not novated by the Bond Payment > (a)
v. Hon. Del Rosario where we held that compensation takes place Bond Payment was only to “pay the amount of P5,000.00
only if both obligations are liquidated. representing balance of the purchase price” > Magdalena Estates
did not protest nor object when it accepted the payment of P5,000
because it knew that that was the complete amount undertaken by
the surety as appearing in the contract ~ Magdalena cannot thus
In the instant case, both obligations are liquidated. Vicente has the protest for non-payment of the interest when it accepted the amount
obligation to pay his debt due to Jesus in the amount of P300,000.00 of P5,000 from the Luzon Surety Co., Inc., nor apply a part of that
with interest at the rate of 12% per annum counted from the filing of amount as payment for the interests > (b) acceptance of the bond
the instant complaint on August 17, 1993 until fully paid. Jesus, on payment without reservation despite the surety bond’s failure to
the other hand, has the obligation to pay attorney’s fees which the provide that it also guaranteed payment of accruing interest does not
RTC had already determined to be equivalent to whatever amount clearly establish intent to novation > mere fact that the creditor
recoverable from Vicente. The said attorney’s fees were awarded by receives a guaranty or accepts payments from a third person who
the RTC on the counterclaim of Vicente on the basis of "quantum has agreed to assume the obligation, when there is no agreement
meruit" for the legal services he previously rendered to Jesus that the first debtor shall be released from responsibility does not
constitute a novation, and the creditor can still enforce the obligation
against the original debtor > novation by presumption has never
been favoured ~ it needs to be established that the old and new
G.R. No. L-18411 December 17, 1966 contracts are incompatible in all points, or that the will to novate
appears by express agreement of the parties or in acts of similar
MAGDALENA ESTATES, INC. v. ANTONIO A. RODRIGUEZ and import; (c) surety bond is not a new and separate contract but an
HERMINIA C. RODRIGUEZ accessory of the promissory note > obligation to pay a sum of money
is not novated, in a new instrument wherein the old is ratified, by
changing only the terms of payment and adding other obligations not
incompatible with the old one, or wherein the old contract is merely
Facts: The surety bond issued in favour of Magdalena Estates
supplemented by the new one
where Luzon Surety promised to pay the balance of P5k did not
novate the earlier obligation of the Sps. worth P5k plus interests
because the surety bond did not expressly stipulate the payment of
the entire debt and in fact included only the balance of the principal > Art. 1253 is NOT APPLICABLE because it applies to a person
(P5k). Hence, the bond was not a new contract but a mere owing several debts of the same kind of a single creditor and NOT to
accessory to the promissory note absent express stipulation and a person whose obligation as a mere surety is both contingent and
incompatibility. Magdalena could not have demanded from Surety singular; Article 1253 is merely directory, and not mandatory
the payment of interests because the contract of the bond only
included the payment of the principal.
> Sale of Land of/by Magdalena Estates, Inc. to Sps. Antonio and
Herminia Rodriguez > Unpaid Balance of P5000 > Sps. Rodriguez
issued: (a) Promissory Note by Sps. Rodriguez (January 4, 1957)
where they “jointly and severally promise to pay” P5k with 9% G.R. No. 120817 November 4, 1996
interest per annum within 60d from January 7, 1957; (b) Bond with
Luzon Surety Co., Inc. in favour of Magdalena Estates where Luzon
ELSA B. REYES v. COURT OF APPEALS, SECRETARY OF creditor (1293) > Agreement between Eleazar and Reyes and
JUSTICE, AFP-MUTUAL BENEFIT ASSOCIATION, INC., and former’s payment to AFP-MBAI only creates a juridical relation of co-
GRACIELA ELEAZAR debtorship or suretyship on the part of Eleazar to the contractual
obligation of Reyes to AFP-MBAI and the latter can still enforce the
obligation against the petitioner
> No Novation of the Surety Bond by the Trust Agreement > Trustor
CCM only became directly liable to PNB > effect of the Trust
Agreement was that where there had been only two, there would
now be three obligors directly and solidarily bound: PAGRICO, R & B Facts: Broadway did not novate its contract lease with Tropical Hut
Surety and the Trustor CCM > PNB never intended to release, and by its Letter-Agreement wherein it agreed to reduce the rental rates
never did release, R & B Surety > Trust Agreement does not of Tropical. The latter expressly stipulates that such arrangement is
expressly terminate the obligation of R & B Surety under the Surety only temporary without prejudice to the terms of the contract and its
Bond ~ expressly provides for the continuing subsistence of that effectivity subject to Broadway’s discretion.
obligation ~ that “This agreement shall not in any manner release the
R & B and CONSOLACION from their respective liabilities under the
bonds mentioned above” > no unequivocal declaration of
extinguishment of a pre-existing obligation and no showing of > Contract of Lease (November 1980) between Broadway Centrum
complete incompatibility between the old and the new obligation Condominium Corporation and Tropical Hut Food Market. Inc. over
former’s commercial complex > Demand for monthly rental >
Request (February 5, 1982) by Tropical to reduce the rental fees to
P50,000.00 or 2.0% of their monthly sales whichever is higher, up to
the end of the third year of their instalment, due to its low income and
the temporary closure of Doña Juana Rodriguez Avenue >
Provisional and Temporary Agreement (April 20, 1982): reduction of
>> Novation > the extinguishment of an obligation by the substitution the monthly rental on the basis of 2% of gross receipts or
or change of the obligation by a subsequent one which terminates it, P60,000.00 whichever is higher ~ This Provisional arrangement
either by changing its object or principal conditions, or by substituting should not be interpreted as amendment to the lease contract
a new debtor in place of the old one, or by subrogating a third person entered into between us ~ The temporary alteration in rental is
to the rights of the creditor > DUAL PURPOSE: obligation is conditioned on your good faith implementation an the suggestions
extinguished and a new one is created in lieu thereof we conveyed to you > Increase by Broadway of the monthly rental to
P100k (December 15, 1982) effective on July 1983 > Appeal by
Tropical > Denial of Broadway > Complaint for Restraining Order and
Injunction by Tropical: that Broadway cannot unilaterally increase the > Loan Agreement (May 11, June 19, August 22, 1979) by Delta
rentals and (on appeal) that the Letter-Agreement dated April 20, Motors Corporation from State Investment House, Inc. covering a
1982 had novated the Lease Contract ~ that the rental provided for credit line worth P25M > Debt of Delta amounted to P24,010,269.32
in the letter-agreement of 20 April 1982 should subsist while the low > Sale (April 1979 to May 1980) of 35 bus units and 2 engines by
volume of sales of Tropical still continues Delta to California Bus Lines, Inc. > Purchase price of P2,314,000
was covered by 16 promissory notes dated January 23 and April 25,
1980 (by CBLI’s President to Delta), payable in 60 monthly
installments from August 31, 1980, with 14% interest pa >
Promissory notes secured by chattel mortgages over the 35 buses >
> NO NOVATION > Letter-Agreement did not extinguish or alter the CBLI defaulted > Restructuring Agreement (October 7, 1981)
obligations of Tropical and the rights of Broadway under their lease between Delta and CBLI covering the past due instalments and
contract > Express stipulation that Letter-Agreement (1) did not alter implementing (a) a new schedule of payments (extending the period
or modify the Contract of Lease; (2) was only provisional, temporary to pay and including a daily remittance instead of the previously
and conditional (upon good faith implementation by Tropical of the 6 agreed monthly remittance of payments) (b) additional security that
principal suggestions Broadway had conveyed to Tropical in case of default, it would have the authority to take over the
concerning improvement of the operations of Tropical's supermarket management and operations of CBLI until CBLI remitted and/or
at the Broadway Centrum); (3) negotiated a temporary reduction of updated its account > Continuing Deed of Assignment of
rentals > Lack of stipulation regarding the period of time during which Receivables (December 23, 1981) by Delta to SIHI as security for its
the reduced rentals would remain in effect only meant that Broadway loan obligation > Memorandum of Agreement (March 31, 1982)
retained for itself the discretionary right to return to the original between Delta and SIHI where loan agreements were restructured
contractual rates of rental whenever Broadway felt it appropriate to and where Delta would assign to SIHI P8M worth of receivables to
do so > Tropical's theory that Broadway had agreed in the 20 April be deducted from Delta’s account > Default of CBLI ~ Threat of
1982 letter-agreement to maintain the reduced rental so long as Takeover by Delta > Complaint for Injunction (May 3, 1982) by CBLI
Tropical was suffering from a "low volume of sales" appears to us as against Delta and Application by Delta for an issuance of a writ of
an afterthought preliminary mandatory injunction to enforce the management
takeover clause and a writ of preliminary attachment over the buses
> reduction in space and rental fee it sold to CBLI > CFI granted Delta’s writ of attachment (December
27, 1982) on account of the fraudulent disposition by CBLI of its
> NOT REASONABLE because the law says that when parties assets > Deed of Sale (September 15, 1983) between Delta and
contemplated a period for the obligation but none is stipulated, they SIHI where former assigned to the latter 5 of its 16 promissory notes
should ask the Court to set one from CBLI, worth P16,152,819.80 > Demand Letter (December 13,
1983) by SIHI to CBLI for payment directly to it of the 5 promissory
notes > Refusal by CBLI alleging Delta’s take over of its
> Bway should have said that it was a waiver of collection but only management > Balance of P27,067,162.22 for Delta’s loan
for a time period obligations were paid by transfer of ownership of Delta’s buses which
SIHI accepted and acknowledged as full payment of Delta’s
obligation (December 29, 1983) ~ SIHI obtained a writ of replevin for
possession of the buses ~ took possession and sold 17 buses worth
> NO PARTIAL NOVATION in reduction of rental space > Tropical P12,870,526.98, reducing Delta’s debt to P20,061,898.97 which the
surrendered 15% of its floor space YET Broadway reduced the latter was ordered to pay (December 5, 1984) > Compromise
rentals by 50% > No substantial relationship existed between the Agreement (July 24, 1984) between Delta and CBLI where Delta
amount of the reduction of rental and the area of the space returned would extrajudicially foreclose the chattel mortgages over the 35 bus
by Tropical > Floor space immaterial to rental rates ~ No novation units sold to CBLI, approved on July 25, 1984 and actually petitioned
for (December 28, 1984) and executed on April 2, 1987 where 14
buses were sold to Delta for P3,920,000 ~ same 14 buses were later
attached for sale by SIHI against CBLI because... > Refusal of CBLI
to pay SIHI the value of the 5 promissory notes ~ that the
G.R. No. 147950 December 11, 2003 compromise agreement was in full settlement of all its
obligations to Delta including its obligations under the promissory
CALIFORNIA BUS LINES, INC. v. STATE INVESTMENT HOUSE, notes > Suit for Collection of the value of the 5 promissory notes
INC. (December 26, 1984) by SIHI against CBLI > Writ for preliminary
attachment granted and attached 32 buses of CBLI and motion for
sale of 16 buses (December 16, 1987) ~ same 14 buses sold to
Delta > Contention of CBLI: that Restructuring Agreement novated
the Promissory Notes whereby at the time Delta assigned the five
Facts: CBLI’s’s obligation (promissory notes) to SIHI by way of promissory notes to SIHI, the notes were already merged in the
reassignment of the former’s promissory notes issued to Delta which restructuring agreement and cannot be enforced against CBLI
Delta reassigned to SIHI was not novated by the restructuring by SIHI
agreement and compromise agreement between CBLI and Delta
because the first did not expressly novate the notes nor were the two
incompatible and the second did not include SIHI as a party and
excluded the 5 promissory notes due to SIHI.
> Restructuring Agreement and Compromise Agreement did not
novate and discharge, respectively, Delta’s Obligation of Payment of
the Purchase Price of the 35 Bus Units Expressed in the Promissory
Notes
and not merely accidental ~ whether the two obligations can stand
together, each one having its independent existence
>> Restructuring Agreement between Delta and CBLI > No
stipulation that the agreement novated the promissory notes > (a) No
unequivocal declaration of extinguishment of the pre-existing
obligation; (b) No incompatibility > In fact, promissory notes >> Obligations to pay a sum of money is not novated by an
expressly ratifies the obligation ~ Par.8 ~ “Except as otherwise instrument that expressly recognizes the old, changes only the terms
modified in this Agreement, the terms and conditions stipulated in of payment, and adds other obligations not incompatible with the old
[the promissory notes] shall continue to govern the relationship ones, or where the new contract merely supplements the old one ~
between the parties and that the Chattel Mortgage...shall continue to mere extension of payment and the addition of another obligation not
secure the obligation until full payment” > expressly recognize the incompatible with the old one is not a novation (Inchausti & Co. v.
continuing existence and validity of the old one > different schedule Yulo, Tible v. Aquino and Pascual v. Lacsamana)
and manner of payment, to restructure the mode of payments by the
buyer so that it could settle its outstanding obligation in spite of its
delinquency in payment, is not tantamount to novation >Agreement
merely provided for a new schedule of payments and additional
SIME DARBY PILIPINAS, INC., VS. GOODYEAR PHILIPPINES,
security (take-over clause)
INC. andMACGRAPHICS CARRANZ INTERNATIONAL
CORPORATIONG.R. No. 183210 June 8, 2011
Whether or not Sime Darby should have secured the consent of Held:
Macgraphics to the assignment of the lease before it could be
effective. There was no novation because there had been no substitution of
debtors when De Jesus alone paid the interests and attempted to
pay the debt with a dishounourable check. De Jesus did not become
the lone debtor because the two had bound themselves jointly and
HELD: solidary and thus, only one of the debtors can pay for the entire
obligation. Furthermore, the check did not substitute the promissory
Whether Macgraphics gave its consent to the assignment of note absent express extinguishment of and incompatibility with the
leasehold rights of Sime Darby is a question of fact. It is not promissory note. In fact, the check had been issued precisely to
reviewable. On this score alone, the petition of Sime Darby fails. answer for the obligation in the promissory note.
Even if the Court should sidestep this otherwise fatal miscue, the
petition of Sime Darby remains bereft of any merit. Article 1649 of the
New Civil Code provides xxx Art. 1649. The lesse ecannot assign the
lease without the consent of the lessor, unless there is a stipulation > Loan by Dionisio Llamas to Romeo Garcia and Eduardo de Jesus
to the contrary. (n) (December 23, 1996) for P400k > Garcia and de Jesus issued a
promissory note payable on January 23, 1997, binding themselves
jointly and severally > Failure to Pay > Suit by Llamas for Sum of
Money and Damages > Contention of Garcia: that the issuance of
In an assignment of a lease, there is a novation by the substitution of
the check by de Jesus and Llama’s acceptance of it novated or
the person of one of the parties – the lessee. The personality of the
superseded the promissory note > Contention of de Jesus: that he
lessee, who dissociates from the lease, disappears. Thereafter, a
received only P360k and paid P120k by way of interests where
new juridical relation arises between the two persons who remain –
Llamas allegedly agreed to accept the benefits de Jesus would
the lessor and the assignee who is converted into the new lessee.
receive for his retirement for the satisfaction of the debt > Contention
The objective of the law in prohibiting the assignment of the lease
of Llamas: that no novation -- express or implied -- had taken place
without the lessor’s consent is to protect the owner or lessor of the
when he accepted the check from De Jesus ~ CA held that the check
leased property.
was issued precisely to pay for the loan that was covered by the
promissory note jointly and severally undertaken by Garcia and De
Jesus where the acceptance of the check did not serve to make De
Jesus the sole debtor because (a) the obligation incurred by him and
A review of the lease contract between Sime Darby and Macgraphics
Garcia was joint and several; (b) the check -- which had been
discloses no stipulation that Sime Darby could assign the lease
intended to extinguish the obligation -- bounced upon its
without the consent of Macgraphics. xxx The consent of the lessor to
presentment
an assignment of lease may indeed be given expressly or impliedly.
It need not be given simultaneously with that of the lessee and of the
assignee. Neither is it required to be in any specific or particular
form. It must, however, be clearly given. In this case, it cannot be
said that Macgraphics gave its implied consent to the assignment of > No novation by substitution of debtor > alleged substitution of De
lease. Jesus as sole debtor > novation must be clear and express > old one
must be expressly released from the obligation, and the third person
or new debtor must assume the former’s place in the relation >
Acceptance of his check did not change the person of the debtor,
In sum, it is clear that by its failure to secure the consent of because a joint and solidary obligor is required to pay the entirety of
Macgraphics to the assignment of lease, Sime Darby failed to the obligation ~ De Jesus was not a third person to the obligation
perform what was incumbent upon it under the Deed of Assignment.
The rescission of the Deed of Assignment pursuant to Article 1191 of
the New Civil Code is, thus, justified.
G.R. No. 154127 December 8, 2003 > No novation by the replacement of the promissory note by the
check > check could not have extinguished the obligation, because it
ROMEO C. GARCIA v. DIONISIO V. LLAMAS bounced upon presentment > the delivery of a check produces the
effect of payment only when it is encashed > (a) parties did not
unequivocally declare that the old obligation had been extinguished
by the issuance and the acceptance of the check, or that the check
Facts: would take the place of the note; (b) no incompatibility between the
promissory note and the check ~ can stand together where note
Romeo Garcia and Eduarde de Jesus obtained a loan from Dionisio evidences the loan obligation andthe check answers for it
Llamas and they issued a promissory note whereby they bound
themselves jointly and solidarily. They defaulted in full payment and
thus, Llamas sued for collection. Garcia contended that his obligation
had been novated by substitution of debtor when De Jesus paid the
>> Novation > a mode of extinguishing an obligation by changing its
debt and its interests and by substitution of the promissory note by
objects or principal obligations, by substituting a new debtor in place
the check issued by De Jesus.
of the old one, or by subrogating a third person to the rights of the intention to extinguish Quinto’s obligation where the two customers
creditor > 1293 ~ Novation which consists in substituting a new were merely added as persons liable. Moreover, the obligation of the
debtor in the place of the original one, may be made even without two customers arose from a different transaction than that which
the knowledge or against the will of the latter, but not without the Quinto is being held liable.
consent of the creditor
>> Modificatory when the old obligation subsists to the extent that it
remains compatible with the amendatory agreement.
>> Objective or real novation by changing the object or the principal > No Novation by substitution of debtors > (1) changes consists only
conditions in the manner of payment where Cariaga merely acquiesced to the
payment but did not give her consent to enter into a new contract ~
>> Subjective or personal novation by substituting the person of the only to prevent the situation where she would end up with nothing
debtor or subrogating a third person to the rights of the creditor because the customers had no money to immediately pay with and
so she was forced to receive the tender of Camacho > (2) ALSO,
payment was for the purchase, not of the jewelry subject of this case,
but of some other jewelry subject of a previous transaction
>> Express when the new obligation declares in unequivocal terms > NEITHER expromision or delegacion > strangers to a contract
that the old obligation is extinguished agrees to assume an obligation have the effect only of adding to the
number of persons liable BUT does not necessarily imply the
>> Implied when the new obligation is incompatible with the old one extinguishment of the liability of the first debtor > acceptance by the
on every point > test of incompatibility is whether the two obligations creditor of payments from a third person does not constitute an
can stand together, each one with its own independent existence extinctive novation absent an agreement that the first debtor shall be
released from responsibility > there must be a clear intention on the
>> Requisites must concur: 1) There must be a previous valid part of the parties to release the accused from her responsibility
obligation. 2) The parties concerned must agree to a new contract. 3)
The old contract must be extinguished. 4) There must be a valid new
contract
G.R. No. 142838 August 9, 2001
G.R. No. 126712 April 14, 1999 Facts: Gatmaitan is not bound under the MOA with Licaros because
the MOA which they intended to be a conventional subrogation of
creditors (Gatmaitan subrogating Licaros for the Bank’s debt to the
LEONIDA C. QUINTO v. PEOPLE OF THE PHILIPPINES
latter) never became effective for lack of the debtor’s consent.
Hence, MOA is invalid.